Hi Chris
In response to your mail ...
Water from the top but only to keep the soil damp - not soaking wet. Let it get fairly dry between waterings (but not bone dry or the plant will wilt - although it should recover once watered). If the leaves start to turn yellow you are watering far too much. Don't allow the pot to sit in water - it needs to drain (stand pot on some gravel in a tray if possible).
It could be that the plant is not getting enough light. Bright light through a south facing window is not direct sunlight and will be okay for both basil and chile. Once plants are older and established place outside in direct sunlight.
Depending on type of Basil some leaves look a bit curly anyway (they curl slightly backwards along the centre line vein).
SnS
