The diaphragm is a rubber seal that fits inside the pressure differential assembly.
It pushes a pin onto the microswitch when you turn on the hot water.
If it has a hole in it it may be sruggling to push the pin all the way until you turn the water on full and provide more pressure.
You can get a diphragm for a tenner, I bought one off ebay the other week. http://cgi.ebay.co.uk/BAXI-80E-105E...photoQQcmdZViewItemQQ_trksidZp1742.m153.l1262
For a diagram of where it fits go to http://www.partsarena.com/baxi/ and browse to baxi/boiler/combi/combi 80E/parts list/combi 80e/HYDRAULICS.
The hot water diaphragm is located in part 103, pressure differential assembly.