i hvn`t studied carbonyl compounds so i`m answring this purely from the mechanism that i`ve learnt till now....
i think in dil. solutions conc of water is more and water is polar protic solvent....
so the H+ ion will attack the OH-grp and water(which is a good leaving grp) will come out and as result of which a stable carbocation will be formed....since the lone pairs of oxygen will undergo resonance....so the product cannot be formed in dil. solns....this is what i think........but i dnt knw why ester will not be formed