I just wanted some opinions on this topic. If I'm going through the game with a full party of six my PC being a multi-classed Thief/Mage all other NPC's being single-classed what's an average expected level for everybody assuming that I do most of the side quests in Chapter 2?
Also, is it feasible for me to complete Watcher's Keep at the end of Chap 2 before I move on to Chapter 3?

The transition to Chapter 3 is too flexible to put a "party-level" mark on it--you can hold it off for as long as you want. Some people even build their parties up and do the hardest fights in the game before paying that 15,000 gold, just to say they beat the Twisted Rune in Chapter 2. Don't worry about having a low-level party entering Chapter 3: You'll be getting Quest Experience so fast it'll make your head spin.

"complete Watcher's Keep"? Only if you're a glutton for punishment..... Go there as early as you possibly can (once you have some money in the bank, that is) and go shopping on the roof. DON'T GO INSIDE YET, unless you want to risk losing the Foebane+3. Then, in Chapter 3 or late Chapter 2, do some of the first level and find a couple of very nice items. I would leave the rest of the keep until you're in ToB itself, as you'll be higher-level then, and therefore facing tougher enemies, who give you more EXP for killing them.

It doesnt matter what lvl you are does it. The game adjusts its hardness to your lvl. I did EVERY quest in chapter to, all the fights and dragons and stuff. I had a kensai/mage lvl 9/15 before I went to chapter 3. From spellhold on I faced more liches then I remembered were there!