This is the first zone that's technically part of the ocean. Obviously, you won't find any Diglett in the water--they are Ground-types, after all. So your searching should be limited to dry land. It's not so bad here, but later on, you may need to scour for islets in the middle of the sea.
1/7: From the Courageous Cavern entrance, approach the tall grass on the left side. By some pebbles just before the tall grass, near the cliff wall.
2/7: With the cave entrance behind you, go forward while keeping on the right side. After the red flowers and just before the shoreline begins, next to some pebbles by the waterside.
3/7: From the cave entrance, go all the way to the end of this strip of land. At the edge of the shoreline, somewhat near the cliff wall.
4/7: From the cave entrance, enter the water from the shoreline and swim to the isolated shore to the right of the entrance. Head for the two logs in the middle. Face the central island in the lagoon and slowly turn right. In the sand, a few paces away.
5/7: From Diglett 4, turn around until you face the cliff wall. You'll find it near the cliff wall.
6/7: Swim towards the big island in the centre of the lagoon. You can find a shore to land on in the direction of the ocean. After reaching the shore, go up the slope and turn right. It's located near the red flowers, by the land's edge.
7/7: From Diglett 6, travel anti-clockwise around the island. After going through the tall grass, keep close to the cliff wall. It's waiting a few paces after the red flowers, but before the red item ball.
80+ Diglett have been delivered back to their master. It'll be a while before your next reward, so let's quickly press on.