Hey Chips, recognizing that there is no specific right
way of mic'ing, can I offer an opposing opinion on this subject?
I know the way you describe it is the way HDs are usually mic'd, but imho and mileage, it emphasizes the harsher aspects of HDs in live situations. The lower, richer sustaining tones don't stand much of a chance being mic'd from the the smallest portion of most hammered dulcimers. (Studio work is completely different.)
Churches are generally reverberant acoustic spaces, and if an engineer isn't mic'ing an entire group from a short distance then close mic'ing with two microphones usually gives me the tone I'm seeking. If the space is quiet enough then, yes, I can use a condensor, but this isn't usually the case. I use two microphones on boom stands positioned about middle of the instrument as close to the playing area as I can get them without interfering with hammering. I'm careful to to avoid violating the rule of thirds which says the any distance mic A is from the instrument, mic B must be three times that distance from mic A. This eliminates the cancellation that can occur with two mics.
As to the mics themselves, the SM57 is, imho, just about the worst
mic you can use on an HD. The dynamic properties of that particular mic are perfect for mic'ing amplifiers and snare drums because they emphasize mids and need a lot of sound to excite their diaphragms. SM57s are great workhorse mics and I use them lots. You'll find them all over thousands of professional recordings, but not often on acoustic instruments. When used on HDs SM57s excel at picking up the attack, but are lousy for getting the tone carrying sustain.
The Beta57 is an entirely different microphone and requires much less SPL (sound pressure level) and I do enjoy hearing HDs on those. The Beta57 has a greenish/blue rubberband around the capsule and is easy to spot vs an SM57.
Have I done gigs using SM57s? You bet. Will I do it again if that's all that is available? You bet. But I'd chose just about any mic other than that, and I absolutely never mic from the small rail. If I only have one mic on a stick stand it still goes to the side and gets angled down 45 degrees toward the center of the bass bridge.
Sorry for the long post, but I think this is kind of a big deal. If you're mic shopping, spend the extra dollars for the Beta57 unless you're going to use it to mic an amplifier. The SM57 is a cardioid and a Beta 57 is supercardioid. The Beta 57 has a brighter frequency response.
Stepping off the soapbox now and offering the space to the next fellow knucklehead willing to offer an opinion on a subject as subjective as this one.