My kids are both on the third grade basketball team and for the most part -- it is a comedy of errors watching them "play" the game and learn the game!
Of course, teaching the kids how to play the game is the job of the coach but I like how the local referees take an active role of teaching the kids during the games. As you can imagine, the rules of basketball for 3rd graders are not very strictly enforced -- but when they are, I really like how the referee will squat down in front of the kid and tell him exactly why the whistle was blown or why the foul was called. This way, the youngster can get immediate feedback and learn the game one rule at a time.
Similarly, diving referees and judges should do the same thing -- especially in summer league diving. If a failed dive, balk or other penalty is called, the referee (or judge) should call the young aspiring diver over and explain exactly why the penalty was called to make sure they understand. In certain instances, I think even letting young diver repeat a dive that was failed is a great opportunity to teach the sport to them. Call them over, explain why the dive was failed and then let them try it again. This is a non-threatening and non embarrassing way to teach a young diver and keep them involved in the sport by taking a potentially humiliating experience and turning it into a positive situation.