The SM58 is world renown as a vocal mic... but that doesn't mean that it can't sound good as an instrument mic. The rub is, live vs. Memorex. I use 58's live for everything from soup to nuts. Not my first choice in many cases, but its what I have when mic-ing various bands. They have a "presence" (which means they are biased to pick up frequencys) at around 10k, good for some vocals, but probably accounting for your "twang".
For recording to a 4track as a hobby, you can do better than a 58, but can get surprisingly good results with an hour or two of experimentation.
I wasn't kidding about crawling around in front of your guitar with your ear searching for the Martin's "sweet spot"... it has one (probably several). Once you find an interesting spot... on the lower shoulder, below the neck is a favorite, or the rear bout by the pin... stick a mic on it and see how it sounds. As far as using 2 mics... I wouldn't be afraid to try it, but the problem you have is when the sound that one mic is picking up is 180 out of phase whith the other. Those mics will cancel a certain frequency(s) out.
If you haven't looked at www.nomadland.com yet, do! The equipment specs have some great ideas. Basicaly, the idea of blending (not as in Fishman, which I don't care for, I'll explain later) taken to a very high level. The highs from one type of pickup EQd out and blended with another type of pickup thats had the lows EQd out. Sound reinforcement, and recording is a compromise... it aint never going to sound as good as your Martin, just find the best "recording" sound, and the right "live" sound and pull them out as needed. Listen to any Ani DiFranco record to hear this... she compresses the hell out of her Alverez, cuts all the highs out, and its got a great bite! Its not the best example of "How a guitar is suposed to sound 101" but it suits her playing.
Some posts earlier mentioned some tecniques and gear... my 2 bits... stay away from the Fishman blender, good theory, bad sound. You would be miles ahead by going the full stereo route into seperate pre's and EQ's. The other Fishman pickups, the Rare Earth in particular, has been wonderful to work with. The best non-pro set up I've worked with was a guy named Sean Michael Devine, who used a Sunrise pickup into an inexpensive (Boss?) 7 band stomp box. He records himself alot, and just gives the soundboard a good sounding signal from the stage.
As far as condenser mics on stage, I use them. Usually in conjunction with another mic... a Byerdynamic M88, as a stereo pair. No problems with feedback, unless the bright face of the guitar was turned off-axis just the right angle to reflect the monitor into the mic... rare.
I have to agree with Don, above... I would install a pickup, and fade it in just enough to compliment the mic-ing... but I wouldn't install the thinline, I'd wait untill I had the cash for a Sunrise and quality pre.
Rick has some sage advice as well, find a tutor whos guitar sound you like... and rip 'em off.
By the way, I almost never mic the soundhole.
This has been a fun discussion... thank you all.