The randomly bond-dilute two-dimensional nearest-neighbor Ising model on the square lattice is studied by renormalization-group methods based on the Migdal-Kadanoff approximate recursion relations. Calculations give both thermal and magnetic exponents associated with the percolative fixed point. Differential recursion relations yield a phase diagram which is in quantitative agreement with all known results. Curves for the specific heat, percolation probability, and magnetization are displayed. The critical region of the specific heat becomes unobservably narrow well above the percolation threshold pc. This provides a possible explanation for the apparent specific-heat rounding in certain experiments.