You have found the 2 divergent recording techniques for non-pop music recording. However, if you have no experience doing this, you are guaranteed amateur results.
The multi-track method allows nearly unlimited ability to tweak every instrument and singer, and the expense of billable hours. Pretty much every pop recording is done this way. It can take months of work to fix everything up after the fact.
Anything that actually sounds good live can be recorded live to stereo for a CD. There is absolutely no reason for this to not sound professional if you have the right engineer. Much of the same equipment may be used, but everything must be done perfectly, live, direct to stereo. While this puts pressure on the engineer to get it right - right now, it's commonly done for classical recordings. Most proponents argue that recording live groups results in a better musical performance, whereas multi-tracking usually has musicians playing in a little room by themselves with headphones, listening to prerecorded material or click tracks. The trick is finding a decent engineer who works like this, and it should cost less than having someone work for weeks afterwards.
CD duplicating is not rocket science. For quantities roughly below 200, duplicators with use towers of multiple CD burning computer drives. An inkjet printer prints the design on each CD. Printed materials can be done in color Xerox. If you are real low budget, you can do this on home equipment.
For larger quantities, it pays to press the CDs as there is a one-time charge for a CD glass master. Then it also usually pays to have a printer do the inserts and the artwork on the CD is silkscreened.
http://www.discmakers.com/ is the nation's gorilla for small batch CDs.