I agree with a lot of the points that you (TimE) make about starting with an acoustic over an electric, but some of the 'cheap' guitars have gotten so poor in quality that trying to make them sound good would be nearly impossible. I've seen brand new guitars with warped necks, new guitars that would not stay in tune, new acoustic guitars which were coming apart at the seams internally, etc... I just think if it is a matter of saving $100.00, you are better off putting out the extra money to get something of decent quality that can be played and that you will want to play.

The other thing that comes into play is that some people have small hands and a big bulky acoustic would be very difficult for them as a starter guitar until they built up some strength and dexterity in their hands. But I agree that if you are a beginner, you should practice without any effects, reverb, etc... because it forces the player to make the instrument sound good on its own.