Steve Ford, who was part of a three-way tie for the lead after round one, carded a 3-under 69 finish one shot back at 10-under-par 134 along with Doug LaBelle II.
Elliott, a two-time winner on the Nationwide Tour, jumped out of the gate with a birdie at the par-5 first at Fox Den Country Club. He followed that up with a birdie at the fourth to coast to 6-under around the turn.
'I'm playing good enough to win,' Elliott said. 'I've been working on a little routine that has been working well for me. If I can just putt well I'll do pretty well.'
The 39-year-old continued his move up the leaderboard on the inward half with an eagle at the par-5 10th. Elliott added a birdie at the very next hole but found trouble with a bogey at the 12th.
Elliott recovered with a birdie at the par-4 14th and drained a 30-foot putt for his second eagle of the round at the par-5 last.
'Yesterday I didn't birdie any of the par-fives,' said Elliott, who is looking for his first victory on tour since 1997. 'The last hole was a little downwind today. It is a good gambling hole that creates a lot of excitement.'
Thatcher played the back nine first and opened with a birdie at the par-5 10th. Thatcher then plugged along with eight straight pars until a birdie at the par-five first.
The 26-year-old added a birdie at the par-4 third and birdied the par-4 fourth to make it two in a row.
'Saturday is moving day so I hope I'm one of those guys moving up the leaderboard,' said Thatcher. 'Playing two good rounds puts you in a good rhythm.'
Guy Boros, who won last week's Lake Erie Charity Classic, shot a 5-under 67 to finish two shots off the lead with Craig Bowden at 9-under-par 135.
Joe Ogilvie, who held a share of the first-round lead with Thatcher and Ford, carded a 1-under 71 to finish one shot further back at 8-under-par 136. He was joined by Paul Claxton and Rocky Walcher in a tie for seventh.
The 36-hole cut fell at 3-under-par 141 with 67 players qualifying for the weekend.