The two soldiers were surrounded by a crowd when they drove by accident into the funeral cortege of Kevin Brady, an IRA man who had been killed by loyalist Michael Stone three days earlier.
The confidential note, entitled “mood at Westminster”, was written by Irish Embassy official Richard Ryan after he spoke to some 20 MPs of “all shades” days after the murders in March 1988.
The diplomat said many MPs who did not take an active interest in Irish affairs became “puffed with outrage and conviction” about doing something in response to the killings.
He said suggestions ranged from demands for a tougher and revised policy of policing funerals to a demand for internment throughout Ireland and, in “more cases than previously”, to a demand to setting a date for withdrawal from Ireland “in order to let the Irish get on with butchering each other”.
Mr Ryan also said people across Britain wrote to their MPs demanding greater action against terrorists.
The two plain-clothed soldiers inadvertently drove into the path of the funeral before mourners pulled them from the car and were beaten before being shot dead by members of the IRA.
The murders happened days after the funerals of the three IRA members who were shot dead by the SAS in Gibraltar.
Mr Ryan said after meeting backbenchers at Westminster, he was struck by their exasperation and anger “without any proper sense of how to ventilate it” while there was a resurgence of “frustrated patience” with Ireland.
“The complexity of the issues elude their instinctual approach to policy questions, that of self-interested pragmatism and this further fuels their primary response to events such as last Saturday’s,” he added.
“It has to be said that no amount of violence toward the UDR, the RUC and Northern Irish or Irish civilians of any religious persuasion could come anywhere near provoking the same reaction in Britain to Saturday’s killings – and the sort of killings they were – of their own English soldiers.”
He later said there was a risk the Anglo-Irish relationship and the Agreement may be “caught in the net” when MPs look for the reasons behind the murders.
Days after the killings, the Secretary of State Tom King, made a speech to the House of Commons in which he described the “horrific events” that shocked the world.
In a separate memo from Mr Ryan following a meeting with Conservative MP Edward Leigh, he said the Prime Minister Margaret Thatcher was left “very distressed and very angry” by the soldiers’ murders.
Mr Leigh indicated that MPs held special meetings to call for support for “much tougher and direct action” by the SAS and other special units against terrorists.
“He stressed several times that he was not exaggerating the mood generally”, Mr Ryan wrote.
Mr King told Mr Leigh during a meeting they had reason to believe the IRA was “planning a serious offensive”, however he did not elaborate further than this.