Some confusion with connecting sensor to Arduino Mega using SPI

Attached is the circuit I have (crudely) drawn up of what I believe is the best way to connect my sensor using SPI.

Data sheet for sensor:

My problem is found on page 26 of the data sheet.

“The LSM303C SPI is a bus slave. The SPI allows writing and reading the registers of the
device. The serial interface interacts with the outside world with 3 wires: CS_XL, CS_MAG, SPC,
SDI. 3-wire mode is entered by setting the CTRL_REG4_A (SIM) and CTRL_REG3_M (SIM) bit
equal to ‘1’ (SPI serial interface mode selection).”

It appears both the MOSI and MISO lines form the arduino are connected to the SDI line on the sensor. Is this correct and is my diagram for my circuit correct? I am a little confused about this conjoined lines thing the sensor is doing.

That chip does not support the SPI interface. Multiplexing the MISO/MOSI pins is not really what the SPI bus is made for. Connect that chip to I2C, that's much easier and more straightforward. If you want to use the so called "SPI" interface, use a software emulation of it using a GPIO where you change the direction between the operations. Although interfacing with the SPI hardware is possible (this application note describes how it can be done: http://www.datsi.fi.upm.es/docencia/Micro_C/dallas/app85.pdf) I would not recommend it. Directly connecting MISO to MOSI might damage your Arduino (short-circuit).