I sailed on the Disney Magic September 2000 on the 7-night cruise. I had two babies with me and they spent a pretty good amount of time in the nursery on board. As far as I know, they don't offer private, in-room babysitting, because if they had, I would have taken advantage of it. The nursery is pretty nice, though, and it costs $6.00 per hour, $5.00 more per hour for each additional child, so we paid $11.00 an hour and it added up quick! If you do plan to use it, make sure you sign up as soon as the nursery is open once you get on the ship, because space fills up really fast.
Can't tell you about diving since I don't dive, but I can say this: if you plan to snorkel while on Castaway Cay, make sure you bring your own gear with you. The $25 charge to rent their cheapo masks and snorkels is outrageous and the lines to get them are hideously long.
Good choice on your cabin -- we had a cabin with balcony also on Deck 8 and it was great. You will certainly enjoy it.