I have tested HCl+peroxide etching with the light/transparent for SMD but it is very easy to get lines broken -- even though I had blue liquid and a proper etching equipment that I could monitor. I am thinking about using just ready fabs such as OSH Park unless finding a good home solution. Which etching method is good for doing finely-packed SMD boards?
In my experience, homemade boards become very difficult with traces thinner than 16 mil (approx. 0.4 mm). Besides the need for an etching process that works uniformly over the entire board, the biggest problem is the photo transfer film and process.
Structures down to 16 mil only worked for me when I used a good laser printer with transparent paper. Printing on plastic sheets (even the ones designed for laser printers) didn't work well because the toner would not stick uniformly. Any case sizes down to SO-8, -14, -16 and the like for ICs and 0805 for passives were o.k. Maybe 0603 would work, too.
New and tiny SMD ICs often have a pitch of 0.4 mm, i.e. a pad/trace approx. 0.2 mm wide and a space approx. 0.2 mm wide. This is just about half as big as the smallest structures that have worked well with my DIY PCBs.
It helps to have a temperature-controlled etching bath where your boards are inserted upright, and where tiny air bubbles keep the solution moving around your board - similar to the air outlet on the bottom of a fishtank.
I've adquired some techniques over the years of home etching. Try to use gloves and using a soft sponge or cloth, wipe the board carefully and softly while inside the etchant. This will accelerate the process and will make it less likely for fine pitched tracks to get destroyed by overetching. Using special toner transfer paper will also help. I also use some magazine paper to transfer the toner and they work good (however not all types work). Transparencies are not good because they tend to spread the toner too much. You can do very fine pitches (3x3 qfn with 20 pins) with no problem once you get the right technique.