Unfortunately I didn't know every diving spot in PNG but Madang is definitely a lovely place. Just hire a boat in one of the Hotels (yeah, I know you get seasick, but is not a long trip) and ask them to take you to one of those small islands near the coast. You won't regret it.
Now, regarding transportation, PMV's (public motor vehicle) and buses are the only options, they are not comfortable but that's what they have; unless you rent a car of course, but it can be really expensive even for australian standards. If you travel by plane, Air Niugini is the way to go but you have to know that ALWAYS, and I really mean it, it will always be late, so pay attention to that if you have any connecting flights. almost 5 years ago