That was a BIG job! In your case, as you stated, the solution is to collect as much water as possible and carry it away from the foundation. I did fail to recommend how Dan might go about getting the water away from the foundation and getting it OUT of there. (I will attempt to say this in using my own experience as a guide ...)
Yes, sealing a wall from the inside that is actually 'dribbling' water won't work. Over time, the 'pressure' behind that water will force the water into the basement. The sealers that one applies to the inside wall will keep 'dampness' out of the basement assuming that's all the basement is experiencing. There are exterior sealers and asphalt 'boards' (I believe) that are used for this problem in new construction I believe they work in conjunction with a drain tile system.)
If one is going to dig up the ground to seal the wall from the outside, it would be advantageous to consider doing a little more work to install a french drain. This is assuming the drain can be installed AND the water can be drained out of there. At my house, the back is relatively flat so installing a foundation drain was not practical. So, I regraded and created a 'gradually sloping' surface-drain (as Suzanne is doing) running parallel to the house, out towards the front of the house, so the water would run 'downhill' (as it traveled parallel to the foundation), then empty onto the front lawn (which IS sloped.) My 'drain' starts at a depth of about 4" and is eventually 24" deep over a distance of about 40'. That's a sloping of about 1/2" per foot. I laid the gravel in the drain such that it is level with the surrounding landscape, so if there's any SURFACE water running away from the foundation, I'm able to catch it in the surface drain. The gravel is wrapped in 2 layers of filter fabric to keep any dirt from 'contaminating' the gravel. The grass kinda grows 'over' the fabric (from the sides of the drain) so you don't really see the fabric. For me, it was the only solution aside from putting in a sump pump. The sump pump WOULD have worked but if I put one in, I was kinda 'inviting' the water to continue to enter the basement and crawlspace. (The water is NOT a wanted-guest!) Besides, who knows what the passing of water through and under the foundation over the years would do to the foundation. (Case closed.)
Hopefully, your 'fix' will do its job and Dan's fix will give him a dry basement as well.