"What is the proper etiquette for de-friending someone on Facebook?"My answer: go to the "Friends" tab at the top of the page, and click "All Friends". On the next page, find the friend you want to "Remove" and click the "X" on the right side (next to their name). Easy as pi (3.141592653...)
If you are concerned that the so-called friend might find out about your removal of him/her from your friends list, rest assured that Facebook will not send the person a notice that you did so. Also, if the person has hundreds of friends, it will be difficult for them to notice one missing.*
*If the person only has ten friends, or keeps count of how many friends they have at all times, you might be screwed. And this is why I hate Facebook.