Acousto-optic signal processors, such as convolvers and correlators, are usually designed to have increased bandwidth and high dynamic range. We will show how, by simply choosing the proper polarization of interacting light, diffraction efficiencies, bandwidth, and dy-namic range can be enhanced. This will be demonstrated bv examining the case of acousto-optic interactions between an unguided, linearly polarized optical beam and a surface acoustic wave. Using the side-entry technique, the optical beam is launched at grazing incidence onto a YZ-LiNb03 substrate, propagating laterally beneath the surface. A conventional coupled-mode analysis is performed, assuming plane wave optical beams. We show how the coupling parameter depends on the polarization and thickness of incident beam and on the acoustic power. Experimental results will also be presented, showing that for p-polarized incident light, diffraction efficiency bandwidths can be larger by a factor of two, when compared to the s-polarized case. Plots of diffraction efficiency versus both deviation from Bragg angle and transducer frequency will be shown. The coupled-mode analysis also gives conditions such that s-polarized light can have a larger bandwidth than p-polarized light, a fact which has not yet been demonstrated experimentally.