Ive been playing about 20 hours now and am about level 25 (I haven't done much grinding yet). I accidentally attacked the undead merchant (darn you curved R2 button!) and now i'm using his uchigatana. I was planning on running a dexterity build, but I am seeing that I wouldnt be able to use elemental weapons because they aren't based on dexterity. This makes me want to try and do a faith/dexterity build where I would know a few miracles, but focus on divine and occult weapons. Would it be stupid for me to go for this build and upgrade my uchi to a divine and eventually an occult uchi?

To be honest with you, a lightning weapon will be much better than anything based on your stats until you are at an much higher level than you need to be you finish the game comfortably, my advice would be to get it to +10 then upgrade it to lightning when you get to the giant blacksmith later, as for a Faith build i can't help you, i'v enot played with Faith really yet, however if you get 20 Faith then help at least 6 people beat bosses you can meet the requirements to join the Warriors of Sunlight, that gets you Lightning Spear, which is pretty bad ass, then at 30 Faith you can get the more power version aswell.

Get the minimum you need to use a weapon, make it lightning and then you don't need STR or DEX anymore. The weapons that scale with stats don't start to become as powerful until you reach about 50 STR (for strength weapons, of course). Pump up Vitality and Endurance after you can use your weapon of choice and you will be good.