Sam, I use that exact electric/acoustic guitar (except mine is the red sunburst) and I get pretty decent results... except I use a combination of miking the guitar itself and recording from the pickup. I've found that I get the best results when plugging the guitar straight into my mixer through a direct box and I mix that somewhat lower than the microphone, to get a full bodied and pristine sound.
The guitar alone doesn't sound bad at all. A little thin, but easily compensated for in the recording stage.
I never really felt limited by that particular guitar, so I can't really lend anything to the discussion as far as how it could affect creativity and motivation, but there is one thing I've learned since I've been playing acoustic:
Standard tuning = limiting for me.
My first change was drop D, which opened up more possibilities, then I began using drop D and changing the three high strings so that I'd end up with an open tuning like D Minor or some Major 7th and unresolved variations. When I started playing with that, I'm telling you, the creative possibilities opened up faster than I could explore them. I stopped using a pick and started doing fingerstyle and now, to this day, every time I pick up my guitar I'm learning something new that I never could have with standard tuning and picking.
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