If the ring was bought by your daughter's father, I'd remove the stone, have it made into a simple, classic solitaire (prong-set or dbty), and give it to her for a significant event--18th birthday, high school graduation, college or grad school graduation. Post-divorce, what it's become is essentially a symbol that you loved each other and made something together far more beautiful than diamonds (her!) And THEN I'd go buy yourself something amazing to celebrate this next phase of your life!
good idea! maybe think of it as a memory of the good times together. I think the daughter deserves to feel that she was born out of love despite the marriage not working.