Me and my wife cant decide on going with diagonal  vs straight wood floor.

Tile floors for example may last 100 years while carpeting and drapes are good for about ten on average or a roof, anywhere from 10 years (roll roofing) to composition 20 -25 or metal roofs 50 years or more and tile roofs even longer.

How you do that is with a piece of horizontal trim right about the place where the first and second floor meet, preferably with a darker color siding above that dividing line.

I like the look of wooden floors but can appreciate the durability of tile.

At this point the work has to be diy [ we've got some kids and grandkids our sons age with skills in painting, electrical work, flooring, sanding, etc] and the budget is tight.

You'll have access to good deals that conventional financing won't cover (some weird rules for habitability, like needs flooring, oven, etc., to close on conventional loan).  

The hardwood floors appear to be salvageable, but if not would you recommend a nice laminate throughout the home?

They likely have given you allowances for things like tile, flooring, etc.It doesn't matter what homes are listed for, it matters what similar homes have sold for.

The plan is to find a duplex with at least 3br/1bth on one floor and 1br/1bth on the other.

Pulling out the carpet, kiltz the floor and than painting the house will get rid the traces for a "normal" person.