I use a lavalier mic that I got at radio Shack for about $30 Canadian about 12 years ago. I fasten it to the inside of the SE sound hole with velcro. I guess it depends on how loud your band is. I play the dulcimer solo or with one or two acoustic instruments, so volume is not a big problem. I don't think you can get a really good acoustic sound with a pick-up, but lots of folks disagree with me.
I liked the sound of Doc Watson's guitar a lot better when he was playing into a mic. It sounded like an electric to me the last few times I've seen him.