[quote name='bvharris']What's the highest level gem that can actually drop? I can't remember seeing anything above Flawless Square.[/QUOTE]
I believe you are correct, that's a tier 8 gem.
01 - Chipped
02 - Flawed
03 - (No Prefix/Suffix)
04 - Flawless
05 - Perfect
06 - Radiant
07 - Square
08 - Flawless Square (Best drop-able gem)
^^ Crafting costs lowered for the above if I remember correctly. Selling this aren't a big deal because they drop and don't always have a cost attached to them since you don't absolutely need to craft/upgrade them.
09 - Perfect Square (Sold at a loss after 15% fee)
10 - Radiant Square (Sold at a loss after 15% fee)
11 - Star (Sold at a loss after 15% fee)
12 - Flawless Star (Sold at a loss after 15% fee)
13 - Perfect Star (Small profit margin)
14 - Radiant Star (Large profit margin)
This explains it a little bit more (referring to the chart, not the post):
http://www.reddit.com/r/Diablo/comments/upjew/economics_gem_sellers_are_losing_money_and/
I more or less verified it this morning before I left for work. So buying a Flawless Star is better than buying lower gems and crafting one. The only thing cheaper for a buyer would be to find all the gems and craft them themselves.
EDIT: Market might inflate a little bit after the commodity rush dies down a little bit possibly. Though it's hard to say and I wouldn't count on it based on the other markets. So I don't recommend trying to make money there.