So my old tub spout's diverter stopped working and got stuck, leaving me unable to divert the shower head.

I bought a new one, and it seems to work fine except for some reason there is a second hole under the diverter, preventing the water from being diverted to the shower head. Any idea what to do to plug this second hole?

The type of pipe here is a threaded, slip-fit diverter spout.

Here is the model I bought: Buy the Danco 89266 Chrome Universal Tub Spout at Hardware World - The world's #1 home hardware site

Does your new diverter look like this one ?

Well, the concept is somewhat similar to that, but the second hole is in the bottom of the spout, near the "main" opening of the spout.

Ok, you purchased wrong spout. The hole on the bottom is there to attach hose for hand-held shower head. Therefore, when you push diverter, water comes out through that hole instead of being diverted upward towards stationary shower head.

You need the same spout - but w/o that hole.

Thanks