A new discrete variable representation (DVR) in generalized vibrational coordinates is proposed together with a new mixed diabatic/adiabatic contraction technique for the treatment of multidimensional vibrational problems up to high vibrational excitations. Formally based on the equidistant Chebyshev DVR in the grid index the new formulation is particularly suitable for multidimensional minimum energy paths. The new Z-matrix DVR proposed in this paper encompasses usual valence coordinates as well as nonlinear maps of coordinates on optimal nonequidistant grids. The pointwise numerical calculation of all kinetic energy terms avoids the algebraic derivation of specialized analytical forms of the kinetic energy adding to the flexibility of the method. With efficient truncation schemes the generalized DVR allows for a compact representation of the time-dependent wave-packet dynamics in up to six dimensions. Vibrationally adiabatic approaches to the detailed modelling of multidimensional quantum-dynamics usually are hampered by the typically large number of (avoided) crossings in dense spectra. This problem is particularly severe for discrete variable representations. A solution is provided by the new technique of diabatic rotations leading to a systematic construction of locally diabatic channels. This allows the treatment of very dense spectra where conventional truncation techniques fail. Applying the new approach to the vibrational problem of tetratomic molecules demonstrates its flexibility and efficiency. The examples of formaldehyde, ammonia, and hydrogen peroxide cover the whole range from semirigid (CH2O) to large amplitude inversion (NH3) and torsional tunnelling dynamics (H2O2). In solving the full six-dimensional vibrational eigenvalue problems for CH2O and NH3 the Z-matrix DVR shows at least comparable if not superior numerical efficiency compared with specialized techniques. In the case of H2O2 the technique of diabatic rotations and adiabatic contraction for the first time allows the treatment of the tunneling dynamics significantly above the dissociation threshold up to the fifth OH stretch overtone. The calculated decrease of the tunneling rate by about one order of magnitude agrees well with experimental observations.