I used to have a GSD that was obsessed by stones. If you kicked one as you walked along she would go through anything to find it! My sister made the mistake of picking one up that Kaila had dropped at her feet and throwing it over a dry stone wall topped with a hedge (about eight foot high) just after putting her lead on her. She was a very small bitch (the dog, not the sister.....) but dragged my sister over the wall, through the hedge and back again to get that stone! I laughed so much it hurt - redirected the dogs obsession very quickly though!
It's interesting that the dog only digs in one place. Can you put some paving slabs over the hole? Have you got a friendly veterinary or college nearby that could analyse the soil from this spot for you? There is always the chance - sorry to yukky - that someone has buried a pet there in the past and that is what is attracting the dog.