JimH:
Ready for a long one? Pop an Amstel Light and sit back.
There's a lot of good advice on this thread, but it may get overwhelming. Start the process by thinking about what you want to do with the guitar, what kind of music you will be playing, whether you have a steep learning curve or are already accomplished, and whether the music will be played in privacy, a small unamplified setting, a studio or on a stage.
Do you have eclectic musical tastes? Rock / Blues? Bluegrass rhythm? Delta blues? Folk / fingerstyle? Classical?
Playing in a band? Expecting to encounter a microphone in the forseeable future with this thing? Need to be loud, or will this be back porch strumming with friends?
It makes a big difference how the instrument will be used. For instance, I have a Taylor jumbo 6-string. Pretty fancy, an 815. I live for this instrument, but it WILL throw a tantrum if you get next to a mic with it. Just too resonant, too bassy, too uncontrollable. But in a quieter environment, it rings out and is alive! Same thing can be said for D-size instruments (dreadnaughts), slightly smaller than the jumbo. They excel in acoustic rhythm where all the instruments fight with each other. But they are holy terrors to control onstage or with high stage volumes because they start getting twitchy. That's where onboard electronics can save your bacon. Some have notch filters - specialized EQ - built in so you can dial in the overload frequency and cut THAT, while leaving the rest alone. Better gain before feedback.
Sounds like you are looking at an entry level "real" guitar, sort of one step up from entry, and I'm assuming from your posts that you want something for all occasions, if possible. That pegs you in my opinion at about a thousand dollars, give or take a hundred. Better to get that much together and do this once, than to spend five hundred and start learning about laminated tops. You can also find excellent buys in the $ 850 range, so don't despair about the budget too much. The extra increment becomes something that is attainable.
The best all around instrument will be a compromise - not the thumping bass of a D-18, and in this price range, probably not the highs of a rosewood box. But I was amazed when I did a survey of medium size (grand auditorium, for want of a better term) instruments. They are generally thought of as "fingerstyle" but are versatile enough for nearly anything. There are some incredible guitars out there; much, much better than anything available twenty years ago!
For this purchase, I would buy new. Simple reason is that you have a warranty, but no experience. As you get experience, you will find that one guitar won't do it any more; the day will come when you have three. Buy those used if you like, but play it safe the first time out.
You should not settle for anything less than a solid wood guitar. Laminates just don't belong at this price point; they are fine in an entry level instrument. You're shooting for one step up. Solid woods or no sale.
Look for mid range size with a spruce top (Usually Sitka spruce, an excellent material) and Honduras or African mahogany sides and back. Although I love rosewood and lust after curly maple, I firmly believe that the mahoganies are underrated as tonewoods. They really rock. And you have to budget; focus on performance and not on exotic materials. Mahogany neck, rosewood or similar fretboard (many rosewood substitutes are now on the market and seem to be fine), and high quality tuning machines, meaning either Grover, Schaller or Gotoh. Be careful with noname look alikes. They may be fine, but a set of Schallers cost a manufacturer twenty five bucks; no excuse to use anything less on a nine hundred dollar instrument. Don't get open tuners in this price range. Good quality open tuners are pretty expensive, and the others will become sloppy with use.
Look at the general fit and finish, particularly the subtlety of the finish. It's an old manufacturer's trick to glop on the finish like it's going on a bar top. Looks great but is a mark of a price leader guitar. If they cut corners here, then they will have elsewhere, too. Low end Epiphones are right in this category; look great, sound OK, get you into an instrument, but just will not compete with the next level of quality.
That's not a slam, either; Epis make this stuff available to a market who would end up with trouble otherwise. I want the Joe Pass Emperor; I just wish they used half the amount of finish on the damn thing.
My point is that you can get more, much more - than the $500. Korean import will give you.
Look inside the guitar. It should be as impressive as the exterior. Clean, no glue, no splinters, especially around the electronics, if they are on the unit. You'd be amazed at some of the stuff I've seen in an otherwise decent guitar - electronic switching installed with a broadaxe.
Look at the binding, around the corners, and the mitres (corners), if the fingerboard is bound. Straight? "Fixed?" Stay away from adjustable saddles - They belong on electrics. Their presence on an acoustic is a sign of manufacturing expediency.
Now play it, and bring along someone with experience to listen to it and play it, too. Smooth and comfortable neck? Frets feel good, particularly at the edges? (NOTHING sharp?) How is the balance of the guitar, both physicllay and musically? Neck heavy? How does it fit your body? Some find a large guitar sounds nice but is simply uncomfortable to play. You will be spending lots of time with this thing; be sure it's comfortable.
Sometimes the strings are shot on a showroom guitar; it's been hanging there six months, played, etc. Don't be afraid to ask them to put on a new set of strings if you're serious about the purchase and have narrowed it down to a couple. And when you take it home, do yourself a favor. Don't skimp on strings.
Brands: I love Taylors and think that the company has nailed the high quality / affordable price range compromise down cold. They are stunning guitars for the price.
But you've heard of some other brands in this thread; all good ones! I agree that the best value at this price point will be in Canadian and U.S. made instruments. A strong contender is Alvarez. Look closely at Tacomas, which seem to be leading the pack on aggressive pricing. All solid woods and superb quality for under a grand. Look at (and play!) Larrivees. They have their own bracing and body styles, which helps to give them their voice. Beautiful workmanship. Don't forget Guild, who had some horrible years in bankruptcy court during the early '90s, but is coming back like gangbusters ever since the Fender purchase. They are making better guitars now than they ever have, and there is one small fingerstyle cutaway, mahogany sides & back, $850, that keeps calling me. Fender is giving them space to do what they do well.
Martins are wonderful, but they (like Gibson) come into their own at a higher price point. Their offerings at the under $1000 market are interesting, but just don't get me the way their traditional lines do.
And if the budget won't squeak a grand, look )very closely) at the Canadian La Si Do instruments. They make the Seagull and the Simon and Patrick brands. All solid woods, minimal appointments, wide waists (easier to build, sound OK, look a little different) and prices well under a grand!
Twenty years ago, your choice would be Martin, Gibson, Guild and the Yamaha / Takamine / Aria etc. crowd. Not an original idea to be found.
The good news is that today, EVERYONE in this business is building much better than they used to, and the chance of getting a beautiful instrument is running about 97%. The bad news is. . . well, there is no bad news.