I agree with the others, you can get some pretty decent engagement rings without breaking the bank. Mine is white gold since I prefer it over regular gold--and it's not anything with tons of bling or whatever (I can't believe I just used 'bling' in a serious context), but I adore it. Between my engagement and wedding ring, we spent under $200 or so, and I wouldn't trade either ring in for the world
As for a proposal, I think any way you propose to her will be special, IMHO. The very act of you asking her to be your wife trumps any pomp and circumstance, though I like the idea of asking her to grab something out of your pocket or whatever like JessicaKate mentioned, that's really sweet
My husband proposed to me in his front room, in the middle of November, so there was no real special-ness to our engagement beyond the actual engagement though he did mention afterwards that he bought the ring at the same time he bought his ipod--but that's very much my husband for you I suppose