So I tried all but Reach's last suggestion. At first I thought I was gold - plugged up the diverter by hand, showerhead off, no leak. Replaced the shower arm and repeated, no leak. Put the new diverter on and changed the o-ring, no leak. Added the showerhead - leak.
I had one of those cheapo boroscope type cameras but couldn't get a good look at where the leak came from because it kept dying on me, but I think it was on the pipe coming up to the elbow for the shower arm.
Hello, I am curious whether you finally found out exactly where the leak was on your shower line because I have the same problem. As soon as the water pressure build up from the shower diverter there is a leak whenever shower is on. Like you mentioned I am thinking it must be between the diverter to the shower head elbow. It seems that I will have cut a hole behind the wall to troubleshoot but your finding/experience will definitely help. Thanks in advance for your reply.