I agree that a 3/4 size steel string acoustic would probaly fit the bill for you. Definitely go try some out since 3/4 size means different things to different companies. You could also try out some thinner acoustics that are full size - it makes it easier to get your strumming arm up and over the body of the guitar.
We got my daughter a 3/4 size guitar with steel strings and I enjoy playing it myself! Because of the smaller size, I can bend strings like I can on my electric, so it's suitable for blues playing. We got it at guitar center. It's a Mitchell, which I believe is the GC store brand. I was torn between this one and a Laguna. The Laguna had a better sound to my ear, but my daughter was drawn to the other, so that was what we bought. I've heard good things about the Baby Taylor.
A good sales guy should get you what you are interested in and walk away as you try it out. If they hover, it can certainly be intimidating. Go when they are busy...what way they will be much less likely to hang with you, they'll be off trying to sell to some other people.
Proper setup means that the string height is set low enough that it's easy to play but high enough that you don't get a lot of string buzz. Many times, guitars out of the box are setup poorly. If you love everything about a guitar except for the string height, ask if they can bring the action down as part of the sale. Even if they charge, it shouldn't be that much money.