Ernie:
Welcome to the forum! I'm familiar with digging ponds in soil like you describe. The easiest way is to keep pumping out the water as you are digging. You just aren't using a large enough pump.
Yes, the sand will try to wash into the pond as the water runs into the pond. If you make the banks no steeper than 4:1, you will avoid that problem. Use an innertube to float the intake end of the intake hose, or you'll fill it up with sand. Been there, done that and ripped the hose in half trying to pick it up with the excavator..........
We used a 14,000 gph pump to keep the water out of my pond when we renovated it. If one isn't enough, I have used two at the same time. If two 3" pumps aren't big enough, get a single 6" pump.
The only way to do it is to keep the water out and dig in as little amount of water as possible. As the water runs out of the bucket, it takes a lot of sand with it.
Does any of this look familiar?
http://forums.pondboss.com/ubbthreads.php?ubb=showflat&Main=12914&Number=151049#Post151049
