If it was me I think I'd opt to work using a flat border stitch like garter or seed stitch on each side for about an inch so it would lie flat. The middle I would do stockinette (knit a row, purl a row). As you work your stripes keep track of how many rows you put of each color so you can do the same thing on both ends. I'd suggest intarsia for the diamond. You can draw a chart yourself and it would be best on some knitters graph paper (do a Google search and you'll find sources where you can print some up yourself), but regular will work or just draw some up yourself. Check out how to do intarsia in the free videos section. Look under "Advanced Techniques (don't panic), scroll down to "How to knit with 2 colors at a time" and then pick "Intarsia". You could also use a technique called duplicate stitch. For that you just knit the space where the diamond will go (think ahead so you can center it both ways) then using your 'purple' yarn embroider the diamond on over each knit stitch so that it ends up looking like it was knit right on. If done neatly either of those will not look bad on the back side but not like the front by any means.
It is neat that you are starting early on to design things yourself, you learn so much that way and become more independent sooner. And BTW I wish I had your computer skills to create that picture and caption for us.