OK----after many many many times replacing and changing gaskets and nothing chnging, I deecided to sit back and think it through
-First thought----it is not a seat problem, water goes through to the tub spout
Second----the diverters function when turned out is to not allow water past the diverter valve except to the shower piping
Third-----the diverter must be able to stop water from going past the middle plaxtic washerand therefore the middle washer must seal the stem from allowing water to the seat when it is in shower mode
Finally----the middle plastic/hylon washer must not be sealing the stem unit from the main body
I cleaned everything, looked into the main body where the stem is inserted and there in front of the seat is a lip that the second washer seats against (the second middle white washer does NOT FLOAT-IT IS SEATED AGAINST A LIP when the stem is installed, the stem presses the washer against the lip)
MIne had green and white build up---I cleaned it out with a pick (careful not to scratch/gouge) reinstalled the stem and ---VOILA