Princess Diana's Ring Now In Kate's Hands

11/16/2010 2:15 PM PST

Kate Middleton's Engagement Ring... Princess Diana's

Prince William has revealed that he proposed to Kate Middleton with his mom's engagement ring -- the same one Princess Di stopped wearing after Charles cheated on her ... which in turn, ruined the marriage, embarrassed the royals and tore the family apart. Bling Bling!!

Diana famously picked out the £30,000 ring -- which consisted of 14 diamonds surrounding a sapphire -- back in 1981. They divorced in 1996.

So we gotta ask ...