Was Digg the victim of a manual penalty? Did Digg have an issue with its robots.txt file?
No. It was all Google's fault.
"We're sorry about the inconvenience this morning to people trying to search for Digg," explained a Google spokesperson. "In the process of removing a spammy link on Digg.com, we inadvertently applied the webspam action to the whole site. We're correcting this, and the fix should be deployed shortly."
And it was.
Despite all the speculation, there was no ban. Google didn't de-index Digg for announcing a Google Reader replacement.
Google screwed up.