Video here: I tried verifying game files, and before this video I tried sending the shovel to camp, getting a new shovel, throwing it on the ground, passing it around between companions and having different characters try digging. This is kind of an important dig spot, so I don't want to progress until I can dig again.
I have not tried re-installing, and I have not tested any other saves to see if they are also bugged.
I have he same issue, but mine is they respond as if they don't have a shovel when all 4 have one in inventory. I believe this to be a save game bug. I progressed to go to Myrna(sp) tombstone and a mound popped up there, same issue, older toons could not dig. Didn't have the new toon created yet. I created a new toon in camp and when I use him to dig, he works fine, the other 3 do not. I haven't gone back to an older save yet to attemp a fix because dirt mounds are so random(I presume), makes it hard to test.