I just got this email and I thought I'd answer it on the blog and let everyone share their input.
Ok. This is a hard question for me because I avoid using flash anytime I can. But at ceremony's and reception's I have to...so I do. I use the Canon 580EX with the Garg Fong diffuser and I like the results I get but I paid about $600 for the combo. AND THAT'S PROBABLY NOT THE ANSWER YOU'RE LOOKING FOR, right? So, here's some cheaper ways you can diffuse your flash. Buy an attachable diffuser that fits your model. Tell the sales clerk you want to natural light in low light situations and see what he suggests. I've seen a few types (ranging $20 to $50) and I'm sure they all work the same. It will help to avoid harsh flash especially on skin tone.
One thing I used to do when I shot with a pop-up flash was put foggy-colored scotch tape over the light...it worked as a low budget/last minute fix.
I hope this helps.