So it's worth taking a few minutes to sort out wedding and engagement ring etiquette in general.
No. An engagement is a promise to marry each other at a fairly well- defined future time. ("When we're both done with school and have jobs" counts. "Someday, when we can't think of anything better to do" doesn't.) Exchanging a token to confirm the agreement is a custom that dates back to Greek times, when an exchange of rings was used to solemnize business contracts. The token does not have to be a ring, and you can even skip the exchange entirely.
No. Diamond rings were only for the very wealthy until after the first World War, and rubies or garnets were much more popular for engagement rings. (Red is the traditional color of love and passion, and if you couldn't afford a ruby, you could usually afford a garnet.)
Yes. In fact, engagement rings for men were so popular in the 1920s that etiquette books gave young women advice on how to choose an appropriate ring for their fiancés. Birthstones were recommended, except when convention ruled that a specific stone was "feminine." So pearls were out, but stones like tiger's eye were considered good.
If you have nosy friends who want an explanation for your every move, wearing an obvious wedding band as an engagement ring will lead to your being harrassed with questions and advice. However, you can tell them that tradition is on your side. From about the third century through the Renaissance, a single ring was used, and it was actually presented as a betrothal ring, not as a wedding ring. The ring presentation took place on the church steps, before the solemnization of the marriage, and there was no ring exchange after the vows.
Tradition is on his side this time. Double ring ceremonies were rare before World War II and were considered worth noting in the newspaper accounts of weddings all the way through the 1970s. Your officiant can dig out the old ring exchange text, in which the groom said "With this ring, I thee wed" and the bride said a few eloquent words about accepting the ring.
Alternatively, you can have a double ring ceremony, and the groom can wear his ring only on dressy occasions, as it's usually wearing the ring at work that creates the problems (including a danger of catching on things in certain jobs). The answer to "how will people know he's married?" is "by his mentions of 'my wife'" or by the fact that he doesn't ask for or accept dates!
If you're having a religious ceremony, you need to consult your officiant, as religious traditions differ widely. There is no legal requirement to exchange rings, and many religious denominations treat the ring exchange as optional. If that's the case for you, you can exchange something else or skip the rings entirely.
Since the wedding ring goes below the engagement ring, the engagement ring has to come off. It's simplest to leave it home for the day. If you don't want it out of your hands, take it off just before the ceremony and switch it to your right hand (putting it on any finger where it will fit). Then, after the ceremony, put it back in its new place atop the wedding ring.
If the ring positively won't fit on your right hand, the next best thing is to give it to someone trustworthy who won't let it out of his or her sight. The groom or the father of the bride are good choices, as they have pockets (a sad lack in wedding gowns!) and a strong motivation to keep the bride happy. The one thing not to do with an engagement ring is to leave it in a purse, no matter how ornamentally bridal, in the dressing room. Thefts do take place at churches and reception sites!
It is perfectly acceptable to wear the engagement ring on the opposite hand after the wedding. This arrangement isn't all that common these days because "wedding sets" with an interlocking wedding and engagement ring were common for so many years, but with the growing popularity of custom-designed rings, it may make a comeback. If you like wide rings, a pair of very plain rings without a diamond in sight can become armor to the knuckle if worn on the same hand.
When double ring ceremonies first became popular, it was usual to buy the necessary rings in a coordinating set of three: his wedding ring, her wedding ring, and the engagement ring. The his-and-hers rings were bands with the same design in a larger scale for him and a smaller scale for her, and the engagement ring had a diamond. But there was never any firm etiquette rule requiring this, and it's much more common today to find that wedding bands are simply available in sizes from tiny to huge, while engagement rings fit over a variety of wedding bands. It still makes more sense to me that, since the rings symbolize union, you'd have similar designs, but it's not required.
The traditional engraving is initials and wedding date. If you want to squeeze a more creative message in, you're on your own (and "Put it back on!" is a very old joke by now). It's also perfectly okay not to bother with engraving -- so far, I've remembered my husband's name without benefit of a reminder in the ring, and I can usually come within a week on the date of our anniversary.
Opinion varies on this one. I know people who never, ever take off their rings, and who will argue when required to remove them (as for general anaesthesia). Other people regularly remove them for household tasks or work.
Removing the ring does not invalidate the marriage, an especially important thing to remember if your fingers swell when you're pregnant. A ring can also be a hazard if it catches on something protruding when you're working or cleaning. I've heard at least one nasty story about a photographer catching her ring on something in her equipment bag during a job, and I gave my own finger a nasty tug the other day when my ring caught on something in the kitchen. Making sure your ring is properly sized is only a partial solution, as protrusions can still catch on things.