Hmm.
I considered getting one of those a loong time back when they first came out. I saw it in this fernandes catalogue when I was in Sec 2.
Anyways, a squier telecaster would be my vote because not many guitars teach your how to hone your chops like how a telecaster does. My take is that once you can play some good stuff on a telecaster you can play splendidly on pretty much any other guitar.
And just to throw another spanner into the works, I'd suggest the Vox pathfinder 15R for a solid rock / blues tone. Just please change the 2-pin plug to a 3-pin to avoid the nasty buzzing sound which plagues any single-coil guitar.
So (to threadstarter) apart from improving your skills with this basic amp+guitar combo, I'd suggest you save up along the way and prepare to buy any pedals or accessories which you might desire.
Take a look around on the forums, ask sensible questions and I'm sure you will go a long way.