Hi Boo Boo,
It sounds like you've got everything working ok and have just gotten a hold of some inferior midi files. I've been all over the net and most of the free stuff out there is pure junk. With patience and lots of practice you can tweak some of the better ones to sound pretty good. The reason the guitar patch sounds like a piano is because more than likely the part was recorded with a midi keyboard. Strumming a chord on a guitar as opposed to playing it on a keyboard where all the notes sound at the same time is a totally different technique. When creating or modifying midi files, practice makes perfect. It's taken me YEARS to get to the point where my midi stuff sounds great.
Want to save some time? Go to
www.trantracks.com or
www.bandtrax.com.au. You'll find some EXCELLENT midi music on these sites. You have to pay about $10 per song but it's well worth the money in saved time and aggravation. They also have quantity discounts and package deals. Check it out, in the meantime keep polishing your sequencing skills! Hope this helps.
Larry T.