My understanding is that ether cannot be used that way, like other cryptocurrencies. is that correct?
Ether can be used for payments just like any other cryptocurrency. In fact, I can't think of a way that you could build a cryptocurrency that can't be used to pay for things!
What you've probably heard is that ether is "Crypto-fuel" and not intended to be used for payments. Depending on who you ask, this is accurate - the main intended purpose of Ether is to pay for computation on the network, and many people expect that one or more token-based currencies implemented as an Ethereum contract will arise as the main methods of payment in the Ethereum ecosystem.
As soon as something is valuable because some people needs it, it can be a trading vector. Money is a trading vector. Ethereum fuel, known as Ether is useful to many people. It's also secure and trackable. You could use sea shells as money but controlling the global supply is important and shells are not as trackable and convenient than regular money and crypto money. The fact that Ether could also be used as fuel for the Ethereum network does not remove it's ability to be a money like Bitcoin as soon as someone need it, it makes it valuable.
Maybe this is an option: You can exchange your ether with Shapeshift to another cryptocurrency.
Can Laser inscribed Certified Diamonds be an option? Each one is one of a kind with a etched number and corresponding GIA certificate. Why cant the miners get paid with Gems. Like real ones.