Start with half the paste weight in water, then add a bit at the time until almost all the lumps are gone. I am assuming you mean pure olive oil soap, which should eventually need a 1:3 ratio of paste to water, but not always. You want to use as little as possible, because hand made liquid soap is thin.
Nah, I don't really care for 100% olive oil liquid soap, either. I would have upped the Coconut Oil to about 25-30% and taken it out of the olive, but that is just me. You still will dilute the same way. Good habit to get into is to record how much water this recipe requires for dilution so that you can just start with that amount next time.
You need to dilute by starting with half the weight of the paste in water, then add a little at the time until you get rid of most of the lumps of soap. Do this with the soap paste over heat to speed it up. I would wait an hour between water additions.
On the same subject (and I don't mean to hijack this thread) Is there such a thing as diluting it too much afterwards? I have some already-made castile soap and I am adding water to it to dilute for cleaning around the house. Otherwise it gets streaky when I use it on glass and tile.
Is it going to go bad and do I need to add a preservative to it if it's diluted too much or is it going to be ok?
It should be fine if you are going to use it within a reasonable period. I have a bottle of liquid soap from my first batch that is still fine when examined under a microscope. No little beasties growing in there.
But I have to wonder why you are using that super expensive stuff to clean your house.