The thing about old guitars, me thinks, is (as the others have said) aged wood. The wood dries and hardens (crystallisation) as it ages. There have been lots of debates on the wood aging = better tone issue but most agree that older guitars are more resonant and sounds better. Some even say that getting played regularly is part of the formula as the vibrations affect the crystallisation process. This aging process slows down over time, so older guitars are more "settled" than newer ones.
I suspect the other factor is wood selection. During the time when an older guitar is made, the luthier most probably have a wider selection of better quality woods than now. Better as in better trees with tighter rings. Better woods doesn't neccessary mean better guitars but it's already a good start.
Anyway, I think you meant condition, instead of quality? How old is the instrument you're intending to buy? If it's younger than 20 years, i dun think the wood age makes that big a difference to the tone (maybe, can't say for sure). Acoustics may be a different thing, tho.
When buying used instruments, unless you're going to keep it as a collection or plan on reselling it, little scratches and dings here and there shouldn't be much of an issue. But that's just me. Someone else may be very particular about these. Also depends on how much money is involved.
Cracks are not good. I think that's obvious. haha...
The most important thing to check is the neck, for any warp whatsoever. Hold the guitar with headstock pointing away from you and look down the neck from the body. The end of the fingerboard at the headstock end should be parallel to the body end. If it's not, it's warped. Play every fret to make sure there's no buzzing and make sure the frets are not badly worn out. You may want to check the fret ends for any sharp ends and burrs (ouch!). A refret is costly, so it largely depends on the value of the guitar itself. Buzzing can be easily fixed if the neck is ok. Truss rod is another story, doubt you can try turning the nut to check without ruining the setup. So boh pian. You can visually inspect the truss rod threads if you want to.
For tremolo equiped guitars, it's a little more tricky. Some trems are just not worth it. Some can be retrofitted with better trems. For all, you can't check for knife edge wear without removing the trem. You can try and guess by how smooth the movement is. Some knife edges can be replace, some (like the LoPro edge) will require quite a bit of expertise. Those with peizos, just pluck every string and make sure there's sound and the preamp works as it should.
If you're buying acoustics, you may also want to check for loose bracing. Hold the guitar by the neck joint (muting the strings. Dun hold it by the neck alone!) and the bottom of the body, lightly shake the guitar and listen for any thing loose. Also check the bridge for any lifting (gaps between the bridge and body as the bridge coming off the body).
Many other things you can check, lah. Utimately, the payability and tone must satisfy you. That's the most important. Just take your time.
Good luck!
