Coming from a background of desktop product development with a large team, i needed to step back and look at the branching model holistically for web development with smaller team. There is a huge shift in the development process. Small team vs large team, hosting vs shrink-wrapped, planned (patching) vs organic (small and frequent changes) etc.,
I found this excellent article and the summary of this article is the best. It answers all the questions i had in my mind. I’m going with the model2. But i still need to decide on the source control to be used. It’s tough given there are too many good choices svn/git/mercurial.