ok...i don't want to turn this into a big debate....but here's what i would do:
i get all the levels in the mix how you like it -not worryinng about master volume yet. - once you're done with all your effects (reverb, eq, compression on individual tracks, etc...) i would adjust the master volume so that it is not peaking anywhere throughout the song.
Then- in order to attempt at making the song a competitive loudness, i would mixdown all the tracks to a single stereo track (or a 2track as i believe some call it).
once you have your single stereo track, i would maybe add some slight compression and limitind, then normalize to 100%.
this seems to do just fine for me....like you said already- if you want pro results, you're better off going to a professional mastering engineer to get those levels nice and loud while still retaining some dynamics and character.
when limiting and compressing the stereo track- be careful. it's very easy to suck the life out of the song....just mess around with it and have fun.

Before I start to mix, I'll ask the band who & what inspired them? I tell them to bring in CDs of recordings that they like, by major artists, produced professionally. Now we have a reference point with which to start from and we listen to that carefully. Then I start to work my magic. I'm not after trying to exactly mimic what we just listened to. But rather, trying to reproduce a similar soundscape. Careful & competent mixing technique will yield a professional sounding mix. Now, levels won't necessarily be pumped up as high as a professional mastering engineer might. But the sound & the integrity of the mix must first be there.

Level optimization of the mix will be performed after you have a superior sounding mix. As you get more competent & better at mixing, you may find very little need for a third-party mastering engineer? Many folks consider my mixes have already been mastered. That is not necessarily the case or necessary. When I record rock-and-roll, I'm one of those engineers that uses copious amounts of compression & limiting, including downward expansion and/or gating. I'm not interested in the typical definition of the term "dynamic range" when it comes to rock and roll. In fact, I believe it to be a misnomer. Rock-and-roll is typically a steady state amount of volume level. The dynamics come in to play when you can preserve plenty of snappin' punchin' thumpin' impact. It really has very little to do with dynamic range. Of course, soft folk tunes, blues & Jazz don't need this type of aggressive processing. Also true of any fine arts operatic/orchestral productions. With those musical genres, a good-quality mix merely needs simple "normalization", to ensure your peaks make it to full-scale. A.k.a. 0 DBfs. So normalizing is really just a total range adjustment. As it does not do anything to modify the dynamics. It's really a "total shifter" and is not a dynamics range modification function.

Now some folks like to feed their stereo mixing bus across a stereo compressor. I then actually asked to do that by some clients. Particularly to prevent input overloading on certain real-time MP3 encoders such as the Telos Zephyr, that needs the radio station via ISDN digital telephone lines. But some people do that as a matter of practice. Mixing through limiters poses its own challenges. And I don't like my mixes altered while I'm doing them. I'll do it after-the-fact. After I already have a good mix. Then I'll optimize the mix.

One of the tricks to remember is to start with no equalization, no dynamics processing, no effects. You tweak & balance until you get close. Then you start to add all the other accoutrements you believe are necessary or will make a significant improvement. Like myself, you might find that you want some kind of dynamics Range processing on two thirds of your mix? It's not about dynamic range. It's about the feel. The performance. The impact & how it's perceived. Equalizers, like children are better off seen & not heard. Good equalizers can enhance your sound where needed. I prefer equalizers, such as those on cheap Chinese consoles, to remain completely unused, whenever possible. They'll detract from the sound rather than enhance it. Proper balancing is worth more than any equalizer.

Effects are another matter. Easily overused & abused. If you hear lots of effects? That's usually an indicator of something crappie that someone is trying to polish a turd. So, use them sparingly. Short decay reverbs and I mean very short decay, can be utilized to create the sense of a nice ambient space, without sounding like the National Cathedral. Unless, of course, that is your goal? And remember, not everything needs to be pumped up to create a louder than loud final product. You'll only cause everybody so much ear fatigue, they'll never get through an entire song. So remember the KISS credo. And you'll end up with a wonderful product, through no fault of your own. You can blame me instead.

The guilty party. So who is coming to my party?
Ms. Remy Ann David

Then- in order to attempt at making the song a competitive loudness, i would mixdown all the tracks to a single stereo track (or a 2track as i believe some call it).

What is actually meant by mixdown? Is it exporting to a single wav file, and then import back to Sonar for editing?

So normalizing is really just a total range adjustment. As it does not do anything to modify the dynamics.

I've read that normalizing messes up the dynamics of a song. I can then basically normalize all my tunes if needed?

Now some folks like to feed their stereo mixing bus across a stereo compressor.

You lost me there :shock:

I am currently recording a friend of mine that writes very mellow tunes. He has a pretty powerful voice and plays acoustic guitar. I add bass and a tad of electric guitar. For drums I use EZ drummer. As this is my first time recording something like this, I know I will do a lot of things wrong and it will sound like shit :p I also do not own decent monitors, and will have to do without for a while..

I try to stay away from effects as much as possible. At the moment I have used a bit of eq and very little reverb..Have not seen the need to use compressors yet.. I will post the tune in the mix critique forum when its done.

Thank you very much :)