If you really want your guitar to be properly setup, look on tdpri for Ron Kirn's "book". I learned from him and for a time was buying, modifying, setting up guitars as a hobby. I did everything on a very low budget. I went to a counter top installation company and asked them if I could go through their dumpster. I found a great piece of marble to use for leveling frets. I used the adhesive and sandpaper Ron recommended. The feeler gauges and scale are used to set string height and relief (bend of the neck). In short, here's what I've done many, many times. It's not for everyone.
1: Remove the neck. (Remember I was mostly doing strats and teles).
2: Remove the low e and b tuners.
3: Remove the nut. Use some low heat from something like a dryer if needed.
You should build a jig. It would hold the heel of the neck down....screwed to the jig. On the tuner end, I use sanding sponges as they won't harm the finish and are stiff enough to hold the neck in place.
4: Screw the neck to the jig. Don't put the sponges at the other end yet.
5: Adjust the neck with the truss rod to make it perfectly straight.
I use 2 things to make sure it's straight. First, a carpenter square. This relies on the frets, so it's only my first shot. Next, I have a straight edge that's 21 inches long. I've notched out for frets to sit inside the notches. Note that a Les Paul scale simply omits the first fret of a strat scale, so you don't need more than one of these. I use this to make sure the fretboard itself is level. Use something like a piece of paper to be sure it's straight. The cheaper the guitar, the harder it is or impossible. If you need more relief (bow) in 3 places and less in 3 other places, don't be concerned. Especially with junk like Squiers, the fretboard will never be flat, so you need to just work with the frets.
6: Put the jig on a work bench. I clamp it down, then put the sponges under where the nut was. This holds the whole neck very flat. Some people even put rags under the rest of the neck to keep it from moving at all. I only did this with really expensive stuff or if I was doing someone else's guitar.
7: Now it's time to level. First mark the frets. Take a black dry erase market and color the tops of all the frets. You now take your marble 25+ inch with sandpaper and sand along the length of the neck. Rock the tool from the bass side to the treble side. This gives you sanding along the entire fret length. Oh...I used 100 grit sandpaper. I've seen other grits used, but this looks good to me. After 5 or 6 times, look carefully at the frets wrt the marker. You'll see very low frets because they will still have all the marks. Well worn frets from strings digging in will become obvious. Your goal is to remove all the low spots. So low frets are at least touched and string marks are gone. With a really badly worn set of frets, you might compromise and get most of the string marks and leave just a little. I always remember that it is actually possible to play a guitar without frets. So I never am concerned that the frets will get too low. I also prefer lower (vintage frets) on older Mexican strats to newer medium jumbo that from memory, started maybe around 2000 or so.
8: The frets are now level along the entire fretboard. Yay! Next, you need to crown them. This is putting the round profile back on them, which also centers the note on the fret when the string is pressed. There are several ways to do this and I actually find the harder way easier. The "easy" way is to get a fret file which has a handle and typically 3 different profile rounded concave files. Filing with this puts the proper curve in. I find it difficult to do this smoothly. I use a triangle file and do multiple angles and just keep careful watch on the fret. Stay away from the top of the fret as that's already perfect. Of course, before you do any filing, use painters tape to protect the fretboard. Once the profile is set, do the same thing by hand with 3 grits of sandpaper. 100, 300'ish and 1000'ish. This removes the file and sand scratches. Finally, use fine steel wool to polish the fret. It should now look brand new. Now, you want to get rid of any protruding frets that'll feel sharp. This can be done with a flat file. You file down the length of the neck and like with the tops, rock up, so you get the small curve meeting the fret top. Both sides, of course. When done, make sure you didn't create sharp edges and lightly file if needed.
An optional thing I always do is to round the wood between the frets. This gives the neck a well worn feel and is amazingly better feeling than a squared off edge. Use sandpaper and a sanding sponge edge and pay attention and stop often. You're just looking to remove the sharp edge at the edge of the neck. The cheaper the guitar (say a Squier), the more square it's going to be and the more work you'll have to do. Pay close attention and take off less material than you want to. You can always take off more. You want to keep the profile of the finished product consistent down the fretboard. When you're done, clean to top of the fretboard.
Another optional thing I always do is to sand the back of the neck. You know how people talk about Music Man necks and anything EVH is bare wood? Well, it's not. It's just well sanded. Just take some 300 or 400 grit by hand and sand the entire back of the neck. Feel how smooth and easy to move it becomes. If you really want that Music Man feel, get a bottle of tru oil. It's a gunstock protector. Put a small amount on a paper towel and rub it onto the back of the sanded neck. Wait 45 seconds and wipe it off with a clean paper towel. Do it again. Wait overnight and now use any good car wax and wax the back of the neck. You now have the feel of a $3000 guitar.
Bolt everything back together. Use graphite (I use an actual pencil) and "write" into the nut slots. Put some kind of goop under the string tree(s) of a guitar that has them. Then use graphite on the saddles. All this is to allow the strings to move when they need to move. I've heard seasoned guitarists who don't do this at a gig and you hear them tune between songs and there's that sudden "ping". Yah....the string was bound up and then suddenly moves. Their guitar will never stay in tune and yours will.
I found this was a fun hobby and that I could make any guitar play better. It takes some guts to sand away at frets, so it's a good idea to start with cheap craigslist guitars. But I'll warn you that Squiers take at least an hour or 2 longer than a Mexican strat because they're that bad. Oh, and throw those Squier pickups in the trash. They hurt my ears.
