Ah yes, Mr. Lamoreaux always gives a good and correct answer, no matter whether it is what you want to hear or not. I don't think I'll be bringing my dulcimer to any more reenactments until I can get a period one with wire frets and all that jazz.
So I guess the answer to this post is: Yes, they existed, but for as rare as MDs were in the 19th century, ones with frets on all 3 strings were even more rare. Don't go trying to pull of your modern dulcimer as Civil War Soldier accurate. Jerry needs to get a hold of the pre-revival dulcimer book

P.S. That account I mentioned earlier I think called it a mountain dulcimer. I don't know the specific wording, but I'm pretty sure which type of dulcimer the diary was talking about was not a question.