I did remove that diaphragm before finding your multiple posts where you said it was a bad idea. Story of my life so to speak...
In any case, I don't think it made much of a difference, because the part does seem pretty hard, and that embedded grain of sand was right on the edge of one of those holes in the showerhead looking thing. Now that the grain of sand is gone there is a pit in the diaphragm in that spot, so even if I was able to get it back to the exact same spot, I'm sure it would leak. I will give your restoration methods a try.
I am not sure if I am diagnosing this properly, but the tilt valve seems ok. I can't feel any air leaking from around the tilt valve stem.
Does anyone have a service manual for these things?
Put it back together, minus the external housing, and then put it under pressure and place it in the water. Where do the various streams of bubbles come from?
N