I'm not sure what level of expertise is advised to be successful in this

You'll need a level of expertise sufficient to do a good job on the projects you take on. The key isn't your level of expertise, which will rise over time and with experience but which you have no control over at any given moment. The key is the projects you take on. Take on only the projects that you know you can do well. Don't overestimate your ability and, whatever you do, don't oversell it.

If you listen to the description of the project and you think, "Oh yeah... I can do that. No problem!" then take it. If you think, "I think I can do that... I'll just have to get a book and learn XML and XSLT first..." then pass on it. Tell the potential client that it just isn't within your skill set but that you would be pleased if they contacted you when something else came up. Then, go get a book on XML and learn it anyway. That way, the next time a client asks if you can do it you'll think, "No problem!"

nor am I sure if it's best to do contracts solo or to work in a small team

There's nothing wrong with a team if you complement each other's skills and you can work together well. One upside is that you might be able to take on some bigger projects. One downside is that you'll all want to be paid. (That can be a real bummer when one person isn't pulling his weight.) Teams work best when one person leads and that one person is good at leading. Remember that working together isn't about being buddies; it's about getting the job done right for the client.

If you do go this route, remember that the team needs to speak with one voice to the client. Don't let the client catch wind of internal disputes; it will look unprofessional and will erode their confidence in you.

If you don't have experience working in a team, it's probably best to try to find a team of people who do have that experience but are willing to work with you even though you don't. That way, you'll learn from them. Working in a team is its own skill.

There is another approach. At least at first, you may find it is easier and more rewarding to work alone. After you have some experience, you might be offered a job which is only slightly bigger than you are comfortable with. You might consider taking it if you can farm out a small piece of it to someone else. In this way, you can build your own team slowly, one person at a time even as you learn how to take the leadership role.

Good luck!

-sauoq
"My two cents aren't worth a dime.";