Just Engaged and Proposals

FMIL gave us one of her rings to use as engagement ring?

My fiance is not the most materialistic person, so when he proposed without a ring, I said yes, but that I didn't want to tell anyone until we got an engagement ring. Not only would that save me from eternally answering the "where's your ring" question with, "oh, my fiance, um, didn't really remember to do that," but it would also help show that he's capable of taking on a big task like this. He's kind of heads in the clouds otherwise.
So, he started investigating the ring situation immediately, with such enthusiasm that it seemed silly to keep witholding our engagement from our nearest and dearest. At dinner, we told his family, and at some point I let it slip that we'd been engaged for a couple of weeks already, but were waiting on an engagement ring. Later my FMIL beckoned my fiance into the back of the house, where I guess she gave him a ring of hers, really nice sapphire, for him to give to me.
Now I'm confused. That ring is dear to her. I don't want to take it from her just because my fiance is kind of a space cadet (he can full on afford a good ring on his own). But I also don't want to seem ungrateful. I'm considering wearing it for the engagement and returning it once we have the wedding bands, but I have to get it re-sized. Any opnions? 
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