Well, I have no intentions of getting engaged so it really is a hypothetical discussion for me And I don't really think it's about whether you want to spend the money or not, but the fact that your woman probably would expect you to. If both parties are fine with something else, go for it. But chances are your wife-to-be might be wanting something pretty and shiny, and I don't think that's wrong in itself.
Certainly not; the idea is to please her, so you're pretty much locked in to what she wants. It defeats the point to get a ring she's not happy with. I've been married a while already so my wife and I are probably a bit jaded on the whole romantic aspect of it.