I know some of you might be thinking why should I bother setting up such a bottom end guitar but hey, its all I have and I figure I'd best learn now on a cheap guitar rather than make a mess of my next nice one

Now the thing plays "ok", as good as you'd expect of a cheap guitar but I figured if I can lower the action and get rid of the slight buzz from the 6th string then it will actually play quite nicely.

I've read the guide on project-guitar and in the columns here and got the general idea so I dug out my old feeler guages, cleaned off the engine oil and set about checking some measurements. I decided not to change anything just yet.

Here is what I found:
1/ At the nut some strings are too low, holding the string on the second and third frets there is no clearance on the 6th string and some of the others are lower than 0.005" -- this is a new guitar so its not wear... what are my options?

2/ The neck might need a little more relief, pinning the first and last fret the gap at the 7th is about 0.005" to 0.008" - but as there is no buzzing anywhere but the first 2-3 frets is this actually worth changing?

3/ String height. Far too high. One of the things I noticed with the pacifica when playing I would dearly love to lower the strings from their current 2/16" to the more widely recommended 1/16" (or 4/64") however again I'm concerned about making the buzz on the 6th string worse.

4/ Intonation
Tuning each string then checking again on at fret 12 I found that most strings where spot on, except the 4th and 5th which where very sharp. I tried adjusting the bridge but was unable to make much difference even with severe tweakings (1/16"!) - I could tweak further but is this normal?!

Any advice you guys can give to help me learn this art would be greatly appreciated.
1/ you might need a new nut... a guitar like that can come with an improper one... or different guage strings

2/ maybe filing down the 2-3 frets
....and for the rest i dont know.... id recommend just takin it in because i had a yamaha rgx and tried to set it up myself not knowing what i was doing... i took it in and had it done cuzit was far too frustrating
wanna know y ur not happy with it? its a ****ty guitar, i know, it's my backup...
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Hey, I didn't say I'm not happy. I just think a little aftermarket care and attention could help. Personally for the money I think it was the best I could get but next time I will be prepared to pay more now I have a little more experience.

Jeff, I'm not sure I want to go filing frets. That sounds a little too scarey but whats this about different gauge strings? Please elaborate.
Take it to a shop mate. Trust me, for 20 quid or less they'll set it up and have it sounding as good as it can.

20 quid now will last you the 12 months or so before you progress enough to get a new more expensive guitar.
Very true, but if I take it to a shop I will have learned nothing.
To be honest though mate, it's not the best guitar to be learning such a craft with. I tried everything I read and attempted to learn when trying to set up a Pacifica and after weeks of frustration I gave up and put it in the shop.

A day later and it was et up just how I wanted it and the intonation was perfect. Well it was as good as it was going to ever be.

I know this isn't much help because you seem adamant about doing it yourself, all I can say is good luck
One thing I had done to mine was to put more of those little metal clasps that hold down the strings on the headstock past the nut (sorry, I don't know what they're called) on. I had some fret buzz in the 5th and 6th strings so they put those clasps-type things on to put more tension on the string pushing down on the nut. Something to consider.
Did it work?

Well anyway I just spent a good hour very slowly and very carefully lowering the strings from the bridge. I took them down to 4/64" but that produced pronounced buzzing around the 12th frett so I took them up a smidge to about 5/54th then released the truss rod a fraction of a turn to increase the relief.

With those changes I was able to get the intonation spot on. I decided to ignore the possibly low nut for the moment. I then went played for about an hour and found that the tone was smoother, the strings lighter to frett and there was no buzzing. Of course I've had a few beers and that might all be in my head!

I might try again at the weekend to see if I can do a better job.