Paul,
I am using a process called wintersowing, where you put the seeds in soil and leave them outside during the Winter. They will sprout in the Spring at the appropriate time and make hardier plants than you get from a greenhouse. You have to be invited to join, but the URL is
https://www.facebook.com/groups/102675420505/ It is a facebook group, and lots of good tips on sprouting and growing veggies and flowers.
It sounds like your tobacco seedlings may have gotten too much water, or the soil you used may have had damping off fungi in it, that will take little seedlings. I use a prefertilized, sterilized potting soil I buy at Shopko. It takes about an inch or two of soil, and you have to have good drainage. I generally punch a few holes in the bottom of the milk jug, and a few around the top to allow water vapor to escape. I also leave the top off the jug for more air. By using the prefertilized soil mixture I don't have to worry about damping off so much. You plant your seeds, put them outside and wait for them to grow. It is good to check them about weekly to make sure they aren't getting dried out, and water them if necessary. You can use milk jugs, or 2 liter pop bottles, or any other clean container with a lid. Some people even use plastic margarine tubs, cutting a hole in the lid and putting plastic wrap over it and keeping it on with the lid. You have to poke some holes for water to get in and out, or they will rot.
You can leave the seedlings in the containers until you are ready to put them in a spot in your garden. Some plants that grow thickly are just transplanted by taking a forkful of the seedlings and potting the whole mess. You may have to take the tops off if they get large, so that they can have room to expand.
I use regular tap water to water them, ours has chlorine and fluoride, but it doesn't seem to make the plants more docile or easier to brainwash. :-) Rainwater would be best, if you can collect it somehow.
Hope that helps a bit.