I would suggest Diigo sets up an official API group where they could give us a status update and possibly provide us some support. At this point though, unless I can get confirmation otherwise, the API appears broke and/or incomplete. If that is the case and they aren't interested in providing updates to it, it's sort of pointless to support each other. I sent an email to ken@diigo.com as requested, but have not received a response.

Public multi-tag searches also seem to return blank:
http://api2.diigo.com/bookmarks?start=1&rows=50&tags=development%2Cweb
where:
http://api2.diigo.com/bookmarks?start=1&rows=50&tags=development
returns entries that have the tag 'web'

API Limit Exceeded means you have made too many calls in the allotted time. I found it's around 7secs in between calls.