While I agree that the D50 is likely a better unit, but in reading your comments, it seems that there is a placement issue based on the sound you get. Both units will give very nice recordings if placed properly which is often difficult. This is why most of us use external mics whenever possible. Quality is one reason, yes, but placement and placement flexibility is an equally important feature of external mics.
I would look to solve that issue first before shelling out more money. It could very well be the high SPL issue and perhaps a lack of balance between the spl's of the various instruments, but I would listen to samples of others using the Zoom H2 to see if that matches your issues sonically.
I think most of the units we know of perform very nicely in the correct environment and with the correct placement. For example, I have had success in tight spots using my MT 2496. I am not recommending it (or not not recommending it
), but I will say as an example, that when using Church mics I can set the LMH swith usually to "M" or "H", and then adjust my gain, but with my AT 853's, I have to stay in the "L" position. (BTW, I always go thru the TRS jacks on my MT, so if someone uses the 1/8 jacks they will have very different results still.) Same recorder, very different results, lots of possible use combinations. The internal mics are what they are on any unit, so determining if they will not work with the music you record should be less difficult. The T-mic my MT came with is different still (omni vs Cardioid for one), so that has different settings that seem to optimize recording with that mic, but placement is always critical. I have a Belkin Tunetalk recording add-on for my iPod. I have some great recordings from that when well placed. It is the least flexible and a step down, but I have made great recordings in a pinch taping (isn't that why we are called tapers) it up on a wall.
I guess my point is, do the research and don't be hasty. You have a very good recorder, and it may or may not be right for you, but if the issue is improper placement, any recorder will be disappointing.