1. Using an undersaddle pickup to record direct ONLY is going to produce a very thin, nasaly, acoustic tone. I recorded all of the guitars that way for this song:
http://www.ultimategarageband.com/ho...rsatisfied.mp3
You get MUCH better results using your pickup AND a mic to record, or just a mic. A mic can make even the cheapest guitar sound great. This song was recorded using a mic; the acoustic guitar sounds MUCH better:
http://www.ultimategarageband.com/hotlinks/blink.mp3
2. Switch to a coated string to kill your finger squeak like Elixyr Polywebs.