I think diving is dealt with quite well in-game, but I think a blatent dive should result in a 3 match ban after the game. Also, players who go down holding their face when they clearly haven't been touched should get at least a 1 match ban. It's such an obvious fix to the problem that I dont know how it hasn't been brought in.
It would soon make players act like men again, instead of total fannys. I cringe whenever I see it and the vast majority of players that do it should be ashamed with themselves.