As Dana points out, the engagement ring doesn't quite mean what it used to -- a downpayment on a woman's virginity. But I would argue that in many cases, an expensive diamond ring does still function as a signal to other men that a woman is "taken" by someone who has paid a lot of money to tell the world that she's his. The bigger the rock, the stronger the "off limits" signal.
Though the meaning of an engagement ring has evolved somewhat, I still see it as an incredibly sexist tradition. No matter how much it costs. Or, as Michael A. Shea writes in comments to Dana's post,
If you are concerned with the price of the traditional engagement ring, and take action in your own relationships, you won't have a feminist marriage. You would have a common sense marriage.
The problem with the tradition engagement ring - at any price, at any salary - from a feminist perspective should be the implied gender roles, the implied differences in attitudes about sex and income.
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