I just setup a campaign and I'm on the second page if my quality score increases, will my add begin to appear on the first page without having to increase my bids? I've set it at $.40 a click btw.
It could or it could not - depends on the market and what the other advertisers in that same space are doing.
It depends on how competitive your market is. improving your quality score should improve your ranking but remember your competitors may be doing the exact same thing so you may need to increase your bids. BTW in case you didn't know when Google comes to check the quality score of your landing page it might visit other pages in your website.
Visit http://adwords.google.com/support/bin/answer.py?answer=50688 to know how to increase your quality score.