The best set up I have found for recording acoustic guitar is the use of 2 mics. I use the C1000s and position it (on a mic stand with boom) arced over the guitar, so that the mic is practically pointing straight down, positioned about 10-12 inches from the guitar neck and directed at the area around the 18th fret. (You definitely want to keep it away from the sound hole as you'll pick up all kinds of unwanted overtones, and bassy boominess.) The C1000s captures all the immediate tone and clarity of the attack as well as the subtleties of the dynamics in your playing.

Then with a Shure SM-58 (or SM-57...I use a 58), you position it about 2-3 feet in front of the guitar to catch all the other ambient tone. Blend both of these signals in stereo, add a touch of reverb, and your recordings will sound as good as anything Leo Kotke puts out. Mind you, I'm a fanatic about this sort of thing. Others may find acceptable results to their ears, with much less.