I've had lots of success with K&K's pickup but even that doesn't really give the real guitar sound. It's just me but I've never really heard an undersaddle pickup I liked for a flat picker. I have a pickup-equipped guitar for venues that can't handle my request to play through a mic.
These days we're using a condenser mic. You would be pleasantly shocked how good even a modest entry level mic like the MXL 990 can make your guitar sound. Seriously. Just because they're cheap doesn't mean they're bad. They're just not "great". From there on up the sky's the limit. We don't play on a particularly loud stage so the mics aren't a problem. Seeing as how you're in that Newgrass genre I'm thinking you'd benefit from it as well. We position our mics about a foot or so away from the guitars and kind of move in and out to control the volume. It took a while to teach the sound man to just set it and forget it.
Last I heard Rice was using Neumann mics. Of course when a guy like that plays a festival he's usually stuck playing through whatever the venue provides. In many cases I've seen some kind of Shure microphone.
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