The diverter on our tub is failing. It diverts about 2/3 of the water so I want to
Change the spout. It is a screw on type with copper supply line. As I tried to
Unscrew the spout the copper supply line began to twist. I could see the pipe
Deform. I stopped not wanting to break off the copper supply line in the wall.

There was no allen wrench screw to loosen. And the supply line is copper.

What am I missing?

Stnick

It's probably type M and not type L which has a thicker wall. Throughout the years it eroded from the inside.

If it's bending, it likely has to be replaced. Cut, sweat new fittings and protecting combustible materials with pads designed for this purpose. Use teflon tape to install the new diverter.

I really doubt you have to go to all that if you quit before damaging it much. I would start heating it an quenching it to break up the crystals of corrosion. If you don't have a torch, try hammering on it. If you can get at the joint, a little penetrating oil may help. I like spray silicone. The hammering will break up the crystals of oxide locking it in place. Spray, hammer, twist, curse, spray...

If you think it is badly damaged, then it will require replacing it.