Yes good points WC. Ebay is a good source of cheap diamond bits.
As far as sharpening by hand well it can be done with a diamond file but the best is using a greenstone wheel. Most people won't have one of these and they are a bit expensive.
To be honest I am happy taking it down to the engineer down the road and giving him $5 for his efforts. He puts a great edge on the bit and with the amount I use my lathe its good value.

Steevo