The Dungeons of Dredmor are the Diggles' natural habitat, if anything about the Diggles can be said to be "natural." Their eggs can be found in the nest chambers littering the upper floors, but be aware that they are usually guarded by a couple of adult members of the species.

While nourishing on their own, 4 of them will make a damned fine Deep Omelette. Provided you've found the recipe on a Bookshelf, have at least four Diggle Eggs, and possess a Disposable Ingot Press, you can make what is the heartiest meal you're likely to enjoy while underground.