We previously examined surface frontogenesis as an initial value problem in a dry inviscid semigeostrophic Eady model focusing on the frontal dynamics associated with interior potential vorticity anomalies. This work explores frontogenesis associated with potential vorticity anomalies in the presence of latent heat release using a generalization of the two-dimensional) semigeostrophic Eady model that insures that the heating term gives correct asymptotic behavior at high and low temperatures. A variety of initial conditions are considered in which upper-level potential vorticity disturbances induce strong positive potential vorticity anomalies near the lower surface. With uniform interior potential vorticity, baroclinic coupling between the upper and surface induced disturbance is weak despite a near neutral moist stability. On the other hand, examples of initial disturbances with interior potential vorticity show greatly enhanced baroclinic coupling between upper and lower disturbances. Comparison with a recent observational study suggests these represent a simple phenomenological description of squall line development. We also find that latent heat release destabilized surface concentrated disturbances which do not intensify in the dry problem. These frontal developments are not primarily baroclinic. Rather, the source of energy is latent heat released in ascent regions and the attendant generation of surface potential vorticity. Development is slow in comparison to baroclinic frontogenesis but is not dependent on the presence of large amplitude perturbations. This diabatic surface development also appears in examples involving upper-level potential vorticity disturbances as a slow intensification of meridional surface winds following the more rapid baroclinic interaction between upper- and lower-level disturbances. Examples suggestive of observed polar low development comprise an initial baroclinic growth phase followed by a slow intensification due to diabatic effects.