Take the following with a grain of salt as it is only my opinion and everyone will have a different one.
Also, if u have an unlimited budget and plan on doing this a lot more, I could put together a 6lb. Pack that doesn't sacrifice much in comfort. But I'm going to assume u don't want to spend $2,000 for your first and possibly only trip...
-2 person tent, weighs about 5 lbs. -- that'll work. There's definitely lighter options, but if only one of you are carrying shelter it should offset things. My wife and I carry a 5lb. tent at the moment. Usually one person carries the tent and the other one carries all the food.
-1 Wal-Mart sleeping bag.. (cost me 20 bucks) Should I upgrade? -- Depends on the temperature rating of the bag and your expected lows. If the bag is rated 30F don't expect to be comfortable below 40F. Also, how compact will it get? This may cause issues with packing, but you could also attach it to the outside of your pack.
-I have heard a few things on quilts, not sure which is better.. preference I assume? --preference yes, but will also help save some weight, but I wouldn't worry about it unless you plan to upgrade your bag and are willing to spend some money.
-I need a sleeping pad. Suggestions?! Quality/comfy sleep is a high priority for me. --cheapest and almost the lightest option would be a z-lite ridge rest. Fold it in half and put your pack under your feet. Almost as comfortable as an inflateable. You could go with an inflatable but to get a similar weight it will cost over $100 more. The ridgerest is bulky, but if you strap it outside your pack, you can pull it out at rest stops to sit on.
-What do you guys carry for food that keeps for 3 days? MRE's? --mountain house for dinner. All you need to do is add boiling water. Two packs of instant oatmeal for breakfast. Whatever you want for lunch, trailmix, bars, jerky, another mountain house? Just make sure your getting enough calories each day. No campfires? Look into a caldera cone. A foster's can pot and esbit tabs will probably be your lightest stove/windscreen/fuel option.
-I need cook ware --keep it simple. If you are only cooking for freeze dried meals then you only need to boil water. If you are allowed camp fires then you don't really even need a stove, just a pot and a spork. Aluminum grease pot for $7 is pretty light for it's size, unless you go the caldera cone route.
-I need a pack -- buy this LAST. And if possible go somewhere where you can try the packs on with weight in them. Your not likely going to be carrying less than 20lb., so I would go with an internal frame pack. Give a good look at Deuter brand. Super comfy for carrying up to 40lb. and only run about $150. However, everyone is different that's why I always recommend wearing a pack with the weight of the gear you have in it. One person's dream is another's nightmare.
-Ive got a Stream Light FLashlight, fire starter, survival knife..etc --throw in some band aids, Motrin, pepto, mini bic, whistle, and 10ft of duct tape.
-I need an efficient way to carry water. This is a worry for me because I dont know how much to carry. I've never made the hike, and I don't know how much water I will see on the trails.
--this you need to look into!!! How far between water sources will decide how much you need to carry. Another good reason for a framed pack, as water is the heaviest thing you will carry. I like water bladders. Most packs allow you to carry them close to your back for balance and comfort, and they make it easy to stay hydrated by having the drink tube so easily accessable. You also need a way to filter your water. Look into the sawyer squeeze filter. You may not like iodine or chlorine. ?
-Should I get a hiking GPS? --how good are you with a map and compass? Don't know north from south? Then yes, but play with it and learn how to use it, and make sure you have the map downloaded for your area.
Of course, as someone else mentioned, it may be a cheaper short term option to rent the gear you need.
Hope that helps a little.