The Squier is going to do you pretty well and you'll even have the option of doing upgrades later on; it's the amp that will be the weak link. For a couple hundred, you should be able to get a new Fender VibroChamp XD. A Squier Strat + VC (maybe $400ish in total) would be a nice rig, and the amp will be something worth keeping even if you get all famous. :)
...so ever since then, I always hang on to the buckle.