Substituting a Dominant chord with a diminished chord (meaning diminshed 7) can easily be done by building a dim7 chord from the b7, the b9, the M3, or the 5th of the original Dominant7 chord.

They all end up being the same chord, but it'll give you an idea of all the places you can "use" one on the fly.

Then once you have that, or to even imply one over a straight Dominant chord, you can play a H-W tone scale from the Root of the Dominant chord. (this could also be considered a W-H scale from the b7, a W-H from the M3, a W-H from the b9, or a W-H from the 5th.

BUT...

There are SO many scales that create diminished chords. And each one is almost interchangable when building the chord from those notes of the Dominant chord.

I have a tutorial at my lessons site (http://lessons.mikedodge.com) called "Common Sounds Found in Jazz". It explains substitutions in great detail, and the playing part of the lesson (is uses Power Tabs) shows the use of the H-W tone, the Lydian b7, the Whole-Tone, and a couple other "diminished movements".

Substutions are the key use understanding dim7 chords, and scales, and being able to apply them anywhere.

You'll see where I take a moving progression and break it down to just three diminished chords. Once you understand basic Diatonic Subs, the diminished chord is EVERYWHERE and can be used as a sub for almost ANY chord.

It would definitely be worth your time to read it.

It's also also mentioned at spots in the Phrygian Dominant tutorial, which is at my lesson site also.