Can you post a picture of a part which has rounded off corners, which you propose are caused by deflection? The reason I ask is if you have the acceleration set too low for the X and/or Y axis, that will consistently cause the machine to cut noticeable curves in corners if it's in constant velocity mode. Search 'constant velocity' or 'G64' on the forum and you'll find plenty about it. If your acceleration for the Y axis is set too low, then the corners you indicated will be rounded, so I'd start by checking that.

I agree that the list of parts you have are not bad except for the rails, so if you replaced all the rails and make a rigid gantry you'd have a good machine. The 2.2kW spindle would have been nice, due to the larger collets, but that's minor compared to the rails.

With £100 you're struggling, as that's not enough to get rails for both the X and Y axes. Without enough funds to replace every 'weak' part, we need to work out which is the least stiff and replace that as it will have the biggest effect overall. The deflection of unsupported rails for a force applied at the center is proportional to the length cubed, and inversely proportional to the diameter raised to the power 4. That means your X rails will deflect (1200/700)^3*(20/25)^4=2.1 times more the Y rails, so I'd be inclined to replace those first. Having said that, the difference is not that great so you would still notice some gain if you replaced either.

Bear in mind that even if you replaced the rails with just 12mm supported rails, this would still be stronger than your current setup as it is the strength of the supporting structure that matters most when using supported rails, not the rail itself. I would advise using at least 20mm though, especially if wanting to cut harder materials like aluminium, since the extra stiffness of the bearings does help.

Another option would be to invest the £100 in getting the open bearings that the supported rails use (SBR25 & SBR20) and adding your own supports to the existing rails by drilling and tapping holes in them. That could be a courageous decision though...