The guitar was used in song accompaniment in England and Scotland in the 18th century. It was very much a bourgeois drawing-room instrument, a more portable alternative to the harp or fortepiano. You can find some samples of its use for Scottish music on my website:

http://www.campin.me.uk/Music/ScotsGuitar.abc

At that period, the guitar was often treated as an alternative to the flute - it played largely in parallel thirds and sixths to the vocal part, and a lot of parlour-song music sheets include a separate line indicated to be played on either guitar or German flute. The standard tuning was CEGceg.

You can find more at Rob McKillop's site, if you can find that site in the first place (he keeps moving it, taking things on- and off-line, books are in print and then they're not and then they are again...)

One of the few signs of the guitar's presence in Scottish music between 1800 and 1950 is a photo of Lady John Scott (Alicia Anne Spottiswoode) taken when she was an old lady (c.1890), and preserved in her papers in the National Library of Scotland. She's sitting in front of a fake classical landscape backdrop holding a modern-looking guitar as a prop, so the instrument must have been a recognizable symbol for a singer-songwriter even then. She was very shy about being pictured - it's a touching portrait.   (It is also completely unreproducible, all shades of very dark sepia).

The guitar in dancebands came along after the banjo. I can't imagine why anybody would prefer it - the banjo in those early recordings has far more punch. Maybe it was just because guitars were cheaper.