Baryon acoustic oscillations (BAO) in the galaxy power spectrum allows us to extract the scale of the comoving sound horizon at recombination, a cosmological standard ruler accurately determined by the cosmic microwave background anisotropy data. We examine various issues important in the use of BAO to probe dark energy. We find that assuming a flat universe, and priors on Omega_m, Omega_m h^2, and Omega_b h^2 as expected from the Planck mission, the constraints on dark energy parameters (w_0,w') scale much less steeply with survey area than (area)^{-1/2} for a given redshift range. The constraints on the dark energy density rho_X(z), however, do scale roughly with (area)^{-1/2} due to the strong correlation between H(z) and Omega_m (which reduces the effect of priors on Omega_m). Dark energy constraints from BAO are very sensitive to the assumed linear scale of matter clustering and the redshift accuracy of the survey. For a BAO survey with 0.5<= z <= 2, sigma(R)=0.4 (corresponding to k_{max}(z=0)=0.086 h Mpc^{-1}), and sigma_z/(1+z)=0.001, (sigma_{w_0},sigma_{w'})=(0.115, 0.183) and (0.069, 0.104) for survey areas of 1000 (deg)^2 and 10000 (deg)^2 respectively. We find that it is critical to minimize the bias in the scale estimates in order to derive reliable dark energy constraints. For a 1000 (10000) square degree BAO survey, a 1-sigma bias in ln H(z) leads to a 2-sigma (3-sigma) bias in w'. The bias in w' due to the same scale bias from ln D_A(z) is slightly smaller and opposite in sign. The results from this paper will be useful in assessing different proposed BAO surveys and guiding the design of optimal dark energy detection strategies.

11 pages including 5 color figures and 1 table. ApJ accepted