As described in a Blogger Help Group thread and a story, Digg had problems with their support of the new version of Blogger at the end of last year.
When the iPhone was announced and posted on Digg, I really wanted to start using that feature and found out the hard way that support for the new Blogger was broken.As shown in these screenshots, the "Blog Settings" have been revamped in the user profile section of the site.
Both the old and new versions of Blogger are in the list of supported software now. If you select the new Blogger, you are directed to Google to grant access to Digg.
After choosing your blog in a drop down list, you are ready to use the "Blog It" feature on Digg stories.