re: How important is a guitar setup?

Playing a guitar without a good set-up is akin to driving a car without a proper wheel alignment. You can drive the car with whacky wheels but you are losing a lot of performance and comfort, and you ultimately experience more of the pain, the fight, versus any satisfaction or thrill.

Here's a few tests as to if you need a set-up. ALL of these tests are done with the guitar laying flat on its back on a level bench or table.

** fret the low E string at the first fret and the 15th fret with your index fingers. Look at the string at the 7th fret. If there is no gap between the string and F7 (fret 7), or if the gap is larger than a business card's thickness, you may need a neck/truss rod adjustment

** fret each string, one at a time, at the fourth fret with your right index finger. Look at the fretted string in relation to F1. If there is no gap, the string's nut slot is too deep. If the gap between the string and F1 is greater than a business card's thickness, the nut slot is too shallow. Open strings buzz when their slots are too deep, slots that are too shallow make fretted chords more difficult to play and throw them out of intonation.
On this test, I want to barely see a gap at F1, and I want to hear a gentle "ping" off the string when I tap the string on the first fret while I'm fretting F4.

** Get a ruler that measures to 32ths of an inch and measure the gap at F12 between the bottom of each string and the peak of F12. Average action for both acoustic and electric guitars is about 2/32" on the high E string, tapering up slightly through strings B,G,D,A, with 3/32" on the low E string. Notice I said "average action." Heavy hitters will want slightly higher action. Finesse players usually have slightly lower action.

** Fret string(s) at the 12th fret and compare the note to the natural 12th fret harmonic note. If the fretted note(s) are audibly sharp or flat in comparison to the harmonic, intonation is off and needs to be set or adjusted.

There are other tests, those are the most obvious, the easiest to perform, and the only ones I give away for free. :)