Yup, definitely sounds like worms. Actually, the information about diazinon is incorrect; in the U.S., at least, most of the haphazard wholesale elimination of chemicals has come to a screeching halt under the new administration. Diazinon, being an OP, is very toxic and is sure to do in lots of earthworms if you do a soil drench at the rates prescribed for grubs. Generally speaking, the site must be on the label, but the pest need not be (look up your state deparment of agriculture's administrative code if you're really worried about the legal issues).
I have been told by some old-timers in the business that Sevin works the best. I have no personal experience with this method, but carbamates are sure to put worms in a world of hurt, too, so I believe it would work just fine.
The best approach: make the soil less hospitable for them. Unfortunately, any approach that reduces the appeal of the soil for them reduces the appeal of the soil for plants. I'm assuming you aren't looking to create a wasteland?
As with any pest, the more you learn about its biology, the more solutions you can come up with yourself to reduce the population. Speculation, but worth a try: aerating your soil will help microorganisms break down organic matter more quickly, leaving less for the worms to thrive on. It will also help when you irrigate. If you irrigate properly (INFREQUENTLY but DEEPLY), it will drive the worms up and give the local bird population a feast. Frequent, shallow waterings are unlikely to reach or disturb the worms, and in addition, will discourage your lawn from developing a healthy, deep root system.
Me, I'd leave them alone until I wanted to go fishing. ;-)
`chris