First, pickups. The Dean Markley in-soundhole pickup (street price $60-$120, depending on model) works fine. I just got it for my daughter’s Norman for a concert the family recently played. While the gain was lower than I wanted — we had to use a mic preamp to boost it a little — the sound was acceptable. Not a bad up-conversion for a stock acoustic guitar. By the way, the mounting of the Markley pickup incorporates thick foam on the mounting grooves, which both isolates against resonant direct vibrations through the housing, and also protects your guitar’s finish.
A better, but more expensive, solution, is to install a transducer under the saddle (which supports the bridge), inside the body of your acoustic guitar. The sound is pure and full, and cosmetically, you won’t even know it’s there, as the controls barely peek out from within the soundhole. Even more important, unlike the Markley, there will be no obstruction under the strings at the soundhole. That lack of obstruction can really make playing the axe easier if you’re really digging in.
If you’re going to mic the guitar, don’t ever mic it at the soundhole! The soundhole is like a vortex cannon, and you’ll get a nasty, boomy, unnatural set of spiky frequencies, and open up a huge possibility of horrible, low-frequency feedback through your system. Instead, simply mic the instrument at the twelfth fret — usually just about where the soundbox ends at the neck (unless you have a cutaway model). This gets your most balanced, guitar-like tone. It also shows you to be a pro, instead of an amateur. Just take my word for it on this matter. Once you’ve tried it a few times, you’ll wonder why you ever did it any other way.
Finally, one of the really important, but never-thought-of issues in capturing an acoustic guitar electronically is how you play it. If you are too light of touch, the instrument won’t play loudly. This is guaranteed to result in obnoxiously loud noise floors in your recordings, because in order to bring the acoutic’s level up in the mix enough to match the other instruments, the engineer will really have to crank it. Suddenly, all the hiss and thumps and other noise coming from your instrument, the effects, the mixer, the processors — these all get turned way up, too. Simply dig in a little harder, and let your instrument speak, and enjoy its natural volume, and this aggregate noise floor will drop out of sight. Just sayin’.
I hope this little primer on electronic capture of acoustic performances has been helpful. This will be especially important if you are playing one of the really good acoustic guitars — don’t waste that gorgeous sound on bad capture.