I just had a conversation with my husband about this, and his view is that an engagement ring should please the woman one is marrying. Full stop.
I liked that answer.
It may be that the ring pleases Kate just as it is, and if so, she should do nothing, of course. But my hubby also said that he would never give me a ring that was not totally about me. He thinks Diana's ring belongs in a museum display for the public to view.
Left to me, I'd say thank you but ask if it could be re-set (as so many jewels are). If that were an issue, I'd ask for another ring or my own ring, more in keeping with my tastes. However out of sync the style and tastefulness of the Diana ring is for Kate, it is clear the history and such please her enough to wear it for William's sake. So that makes it all good, though it does look odd in today's world. JMO.