Digging is self rewarding and some dogs just do it more than others. I would think the penning is a management tool, not a training tool and is to be done when you are not home.
Have you tried filling in the hole with a very inflated balloon, or have you tried hot sauce sprinkled on favourite areas of digging or have you supplied a digging area, eg sandpit and encouraging or luring to dig there by putting fun things for the dog to find.
It is natural and instinctive for dog to dig and therefore one of the harder things to train a dog not to do and requires consistency.
I always give my dogs bones in their crates because if they eat it on the lawn it inevitably leads to digging, at other times chasing a small lizard or worm sets off digging. We also have a lot of grubs and worms near the surface of our lawn as we've got lots of small holes (bandicoots visiting of a night when dogs are locked away) and kooka's hovering around again which sets off digging. Have you noticed anything like that which could be the reason for excessive digging.