Google Reader just added a "Send To" feature that allows you to send the link of a news item to Twitter, Facebook, Delicious, etc. Diigo is not on the list. However, it is possible to add your own "Send To" targets.
For Diigo, this is the recipe:
- Go to "Settings" in Google Reader
- Go to the "Send To" tab
- Click the "Create a custom link" button
- Specify the following details
- Name: Diigo
- URL: http://www.diigo.com/post?url=${url}
- Icon URL: http://www.diigo.com/favicon.ico
- Click "Save"
Now, you can post an entry in Google Reader to Diigo using the "Send to" link in the bottom of each item.
Update: You might also want to take a look at this Lifehacker article.