so I have a {lion's eye diamond} in play and a spell with retrace in my graveyard. If I understand correctly, I can put the retrace spell on the stack, discard a land, then crack my lion's eye diamond for mana to play it, correct?
Lion's Eye Diamond has a clause that specifically prevents it from being activated while paying costs for spells. The last line reads 'any time you could cast an instant'. You can't cast an instant while costs are being paid for a spell or ability.