It comes down to the player. Yes a great player can make a cheap instrument sound good. A weak player will not sound any stronger on an expensive instrument....but like Rick and others have pointed out, a higher end instrument may be easier to work your magic on.

Reminds me of a story Chet Atkins used to tell about years ago taking a cruise with his wife, and they were socializing with some guests they met on the ship. At this point they'd not yet introduced themselves by name to the guests. One of them had a really old beat up guitar and was strumming it, and Chet asked if he could borrow it, and proceeded to play it for them. At the end, the guest who owned the guitar said to Chet " Not bad.....but you're no Chet Atkins."