Firstly - technical: our IT department are investigating the fatal mix that is IE7 and Diigo and "will get back to me". Fortunately for my credibility, the same browser freezing happened when they tried it!
Secondly - the students' reactions: I met up with a small group in another seminar and asked how they had found the IT session. They shrugged, said everything was fine and they had got on with the task quickly and efficiently. They didn't find downloading Chrome a chore and thought Diigo was possibly quite useful.
Thirdly- activity on the Diigo group: 75 out of the 103 students on the course are now members. During the introductory sessions students added some additional links they had researched. The original library has doubled in size. Some joined the site over the weekend and continued to add links (following instructions I had provided in the form of Jing screencasts). Some have added a couple of things into their own libraries, but all of this activity is still limited to the focus of our current assignment. What I hope to see over the coming weeks and months is continued use of the site for saving bookmarks related to other modules.
So maybe not such a disaster after all but whether this proves to be a really useful tool for the students is another question......