The main reason is that which you mentioned. Another issue, which is relevant as a point of principle if not of morality, is the fact that DeBeers was able to largely manufacture the demand *after* capturing an incredible monopoly over the supply. If you look at any culture in the world where this diamond tradition exists, it likely started with an enormous DeBeers marketing campaign.
I might be tempted to consider a synthetic diamond. As the technology improves, they could provide a mass-market alternative to blood diamonds. I have no idea whether the mystique of natural diamonds could transfer to synthetics. But my guess is that it could, since at one time this mystique didn't exist at all. I mean, if it came to be understood that the only difference between natural diamonds and unnatural ones is the fact that natural ones come at the cost of natural lives, I think most people would ask for unnatural ones. Or better yet, rethink their traditions entirely.