When you mentioned buying a guitar of higher quality, what do you mean by that? Better hardware? better construction? then again, what determines better? better hardware just makes the guitar more stable but it does not improve the tone significantly. try bringing your guitar for a set up first before deciding to upgrade your guitar. I think Rallys are good enough as they are (for the price of course).
My opinion is, have an idea of what you want before buying something. Guitar stuff are expensive and before you know it, that $800 budget of yours is out of the window and you still haven't found what you are looking for.
I'm more of a tone person. I listen with my ears more than my eyes so when I buy stuff, I buy based on what I hear and not on what people say. Everyone's words are opinionated. I've seen people raving about a set of pickups only to sell them the following week later.
I buy more 2nd hand stuff only because it's cheaper and you won't lose too much money in the process. For your case, the term "if it's not broken, why fix it" applies. Find out what you feel is lacking in your set up. Too boxy? Lacking headroom? what kind of sound are you referencing too? what is necessary to get that kind of sound.
Usually it's the amp that contributes the most to overall tone. I like my combo amps to have at least 1 12" speaker. whole world of difference when compared to a small practice amp with 8" speaker. pedals and pickups in this equation at the moment is secondary.