Are these two sentences correct?
A. Past continuous: We were mainly Scuba-Diving while we were there.
B. Past Simple: Last week we Scuba-dove?
"Scuba-dove" is a back-formation, not a standard word. It shoudl be understood, but in place of B above I would favor:
Last week we went scuba-diving.
I would also say that your A is rather awkward also. Instead of:
We were mainly Scuba-Diving while we were there.
I would suggest something like
We were mainly engaged in scuba-diving while we were there.
The main thing we did there was go scuba-diving.
This is because scuba-diving isn't something you are it is something you do. One could say use a sentence like:
We were mainly drunk while we were there.
but the gerund form:
We were mainly drinking while we were there.
is more awkward if not wrong.
A note on the word "Scuba-diving". The first element was coined as an acronym SCUBA for Self-Contained Underwater Breathing Apparatus. For a long time the combined word was always spelled as "SCUBA-diving" to indicate this. I think that, like "radar" and "sonor" (both of which started as acronyms in about the same period) "scuba" has now been absorbed as a noun. But if it has been it is a common noun, and should not be capitalized except at the start of a sentence, or in a title, or somewhere that "reef-diving" would be capitalized.
Scuba-diving obeys the same rules as plain diving. The most correct and original past tense construction is "dived". So I'd say: "Last week we Scuba-dived." In north American English though, "dove" has become common, I guess by transfer of the construction from other verbs where this past construction is universal (drive->drove). I'd caution you against using "dove" among British English speakers who are probably unaware of the common American usage and will simply regard it as a mistake. Perhaps an American English speaker can comment on whether "dived" is acceptable there?
Your use of the past continuous in A, sounds natural and is correct, and cleverly avoids this difficulty!