Bubble wrap is pretty cheap and $20 delivered will buy 2 huge rolls of it from most vendors. It comes small, medium and large bubbles. I chose large because it supposedly handles the most weight. My packing is probably overkill but at least it gives me piece of mind! I did consider using a foam shell like the amp packing shown on this site and don't know which is better. Look at it this way, the guitar has 5 layers of protection around it!
Another thought (thank you Steel Guitar Forumites!): The case partition between the steel and the legs/pedal rack is not as solid as the exterior sides of the case. If the case is dropped, it's possible that the entire weight of the steel will be thrust against this partition, totally shattering it and exposing the guitar, rack and legs to damage. To prevent this, it is wise to add two blocks of wood, one at each end of the partition, to shore it up and prevent it from breaking or shifting.
Peanuts? Just plain nuts! I have received two steel guitars, both from major steel stores and builders, that were shipped in a box filled with peanuts. In both cases, the peanuts shifted around allowing the steel case to directly contact the box and the case ripped right through the box. In these cases the guitar was not damaged as it was protected by the case, but the case got scuffed up somewhat. Another result can be that the peanuts will leak out of the card board box leaving you with less packing inside!
One other thought and method I have used is to pack the steel in it's case surrounded by two 3/4 layers of rigid foam. This is a little more expensive than bubble rack, takes more time and results in a bulkier package. I believe it provides the best protection but sometimes I just don't have the patience or think this level of protection is a requirement. See my amp packing page for some pics showing how this is accomplished.
The pictures are self explanatory so I didn't add any text to them. Click on one if you want a larger view.