Be familiar with the basics of the stone before even looking for a place to buy one. A good place to start learning is
http://www.canadadiamonds.com/diamond_tutorials.htm
In general, the bigger the diamond the better the specs need to be. Larger diamonds with larger proportions will magnify any flaws. Point inclusions are favored over other types, such as feathers. When it comes to grading, not all labs are created equal. AGSL is preferred over GIA (AGSL grades harder, which means you actually get what you pay for instead of over paying for a lesser stone).
A general overview:
1) Cut - this affects the fire of your stone the most. No point having a big, poorly cut diamond because it will look…meh. AGSL(0,0,0) or Ideal cut would be the way to go. For cool factor, check out a "hearts and arrows" cut stone. A smaller, well cut stone will sparkle brighter than a large poorly cut stone. And with diamonds, even she has to admit it’s pretty much all about the sparkle.
2), 3), and 4) are Color, Clarity and Carat, in no particular order.
Color - unless compared side by side, and to a stone that is a few letters different, the untrained naked eye can't tell. DEF are the colorless stones, and have a premium price. G next to an F is pretty much impossible to distinguish, but if you put it next to a D, you would be able to tell. Once it's in a setting, it's even harder to tell the difference.
Clarity - You can't tell with the naked eye, or with a 3x scope. Even with a 10x, only with the right focus can you see the spec. And the difference between vvs1 and vvs2 is that the inclusion is near the sides vs. in the centre. For value, a good pick would be vs2 (or vs1) simply because you really can't tell the difference, and again, it will save you money.
Carat - For value, go with a 0.01 pt lower than the threshold: ie) get a .99 instead of a 1.00 to save money, unless it's really important for you to have a 1.00 diamond. Or, if you're looking for a 1.2, go with 1.19. If you go to a jewelers in town, they'll have a book on prices. See where the splits are, and go with the highest in a split for the best value.
Setting
Unless you go with platinum, a setting should be in the range of $200-$400, platinum around $1000. The bulk of the ring budget will be eaten up by the stone.
Other Resource
www.pricescope.com is a great resource. Lots of good information, reviews of grading labs. Also includes tools that you can use to help with selection. Great source of information.
http://www.pricescope.com/cutadviser.asp - Holloway Cut Advisor
Computer analysis of the angles and measurements of a diamond to tell you how good the sparkle would be. Being a layman and trying to “see” the difference between two or more very similar stones is really hard to do. Trust the mathematics. Not all grading labs provide you with the specs, but AGSL does.
When you've educated yourself and are ready to go shopping, sites like BlueNile will be tempting.. instead, stop by different local diamond dealers. Like most large purchases, prices can be negotiated and while they may not match an online price exactly, the difference may be worth it if you're more comfortable there and you've found the perfect one.