I realize that this issue has been going on for some time and that I should have posted before now about my experience...... In any case,

I am currently still experiencing the same behaviors as noted above when trying to use my Diigo toolbar.

Behaviors:
1) when saving a bookmark, the service "loading recommended tags" spins and spins
2) when I click Okay to save a bookmark, I get the error displayed over my Firefox tookbar: "Diigo: A server error has occurred. Your data may not be saved. Please try again later." (screenshot at: http://www.wuala.com/hjohan/Diigo/diigo_error.jpg) -- BTW in each case I've checked, the bookmark *has* been successfully saved despite the error warning.
3) when I visit a site that I have already bookmarked, the Bookmark icon on my Diigo toolbar no longer turns red (as it used to) to indicate that I'm visiting a site I've already got in my bookmark collection. I used to rely on that indicator to avoid adding sites to my growing collection that I'd forgotten was already there.

My details:
Firefox 3.5.2
Diigo toolbar version 3.1.6.16
Windows 7 eval, build 7100

Thanks for any help you may be able to give.

Harold J.