Here’s link to an interesting blog post from the folks at 37signals about hard-copy markup using copy editor’s marks vs. electronic editing using track changes in Word. The post and most of the comments lean towards hard-copy editing being superior. My experience is that electronic editing is far simpler, faster, and easier for authors to understand, especially when there are lots of changes (in which case a marked-up hard copy can become extremely unwieldy). I do recommend a hard-copy final proof if time allows, but for substantive and copy editing, my view is that track changes is the way to go.