#1
I am part of an acoustic duo. We play covers of classic rock and blues. We booked our first gig before we had any equipment (besides guitars). So we went out and bought a cheap Kustom PA. We plugged the guitars straight into the input and it sounds pretty bad.

Now we're looking to get pretty serious. I bought a BBE Acoustimax which has helped and I have a Behringer 3102 equalizer coming.

I'm looking for any kind of advice to get a better live sound. We don't have a lot to spend, but we don't want to waste money on something that isn't going to satisfy us either. Should we start building a rack? Should we upgrade the speakers (what kind)? Do we need a whole new PA?
#2
A whole new PA is the best advice I can offer. Make the speakers the priority.

If you grab the cheapo Behringer 'S' Series speakers and a powered mixer (400W will do fine) you should be able to get a pretty cheap, decent system.