This paper is a sequel to "Computing diagonal form and Jacobson normal form
of a matrix using Groebner bases", J. of Symb. Computation, 46 (5), 2011. We
present a new fraction-free algorithm for the computation of a diagonal form of
a matrix over a certain non-commutative Euclidean domain over a computable
field with the help of Gr\"obner bases. This algorithm is formulated in a
general constructive framework of non-commutative Ore localizations of
G-algebras (OLGAs). We split the computation of a normal form of a matrix
into the diagonalization and the normalization processes. Both of them can be
made fraction-free. For a matrix M over an OLGA we provide a diagonalization
algorithm to compute U,V and D with fraction-free entries such that UMV=D
holds and D is diagonal. The fraction-free approach gives us more information
on the system of linear functional equations and its solutions, than the
classical setup of an operator algebra with rational functions coefficients. In
particular, one can handle distributional solutions together with, say,
meromorphic ones. We investigate Ore localizations of common operator algebras
over K[x] and use them in the unimodularity analysis of transformation
matrices U,V. In turn, this allows to lift the isomorphism of modules over an
OLGA Euclidean domain to a polynomial subring of it. We discuss the relation of
this lifting with the solutions of the original system of equations. Moreover,
we prove some new results concerning normal forms of matrices over non-simple
domains. Our implementation in the computer algebra system {\sc
Singular:Plural} follows the fraction-free strategy and shows impressive
performance, compared with methods which directly use fractions. Since we
experience moderate swell of coefficients and obtain simple transformation
matrices, the method we propose is well suited for solving nontrivial practical
problems.Comment: 25 pages, to appear in Journal of Symbolic Computatio