For years I've been using the 3-5" file for sharpening my hooks. They work great when they are new but it seems that the files rust prematurely and it's hard to get a good edge on a hook after awhile. Is a diamond stone the way to go?

I'd stick with the file. The stones are ok for smaller hooks but they don't take enough metal off on the larger steelhead and salmon hooks. I bought a sheath for my pliers and file. To keep them from rusting simply squirt some WD40 down the hole. Good luck.

Files are the only way to go!

Both. File at home. Keep a stone on the river to touch things up.

File with floating handle...WD 40 after every trip.

Strictly file for me. Get a holdzit tool saver for your file, they work great and are a saltwater anglers dream.
http://www.steelheader.net/Toppages/product_review.htm

I have one of those four inch files in my bag of goodies.