Its not just the odour, it's the inevitable overspray, but thanks for the advice guys, keep it coming
I have spray undercoated indoors, in a small room quite successfully. You just need to take precautions.
With aerosols, open windows as far as they will go. Get lots of air moving through the room, and wear a DIY dusk mask.
To catch overspray get a large cardboard box (from any good corner shop etc.) make sure any holes in it are covered over (freebie newspapers are great). Place the box on its side with the open end towards you, then place an object to boost the height that you can spray the models (an ACTA fleet box or something). If you are really worried about overspray, then put down some more newspaper on the desk, and prop open the flaps of the box.
Place the models you wish to spray onto a firm, flat object, something that will take the weight; an off-cut of fibreboard, a double thickness of currugated cardboard. This is what you will be turning and moving the models on.
Transfer the models into the box and place on the booster. Spray the models with two quick passes, and then turn a bit, repeat until each face of the modle has had two or three light coats to undercoat.
I would recomend spray undercoating over brushes anyday.
If you are dead set on hand undercoating, get a cheap largeish (Size 1 or 2) brush, and thin the paint. If your using GW or Rackham paints, then use water. You are looking to make the paint 'mobile' the consistency of milk is about right. Put on multiple thin coats on the mini, and allow to dry between coats.
The only time I hand undercoat is when touching in after spraying.
As to colour of the undercoat, it really depends on the final colour of the model. I find white undercoat makes for a brighter finish, while black deepens the colors a lot.
For White Stars I would go for a black undercoat, for Abbai, Vorlons and early EA I would likely use a white undercoat.
When painting, I advise you to use a palette. Transfer a bit of paint from the pot and thin down a bit with water to make the paint more mobile. Build up the colour slowly, sometimes an area may need two or three coats to make it an even coverage. Just allow time for each coat to dry before adding another.