I think
Dean what you are saying is a given and obviously the best way for sure. When lots of overdubs are done though the session players may not do this sort of thing so much but keep a little more even and it is up to us to a certain extent to make the dynamics happen here and there. I do like it a lot when the band can do all that naturally, it saves a lot of time later in mixing too.
It is one of the reasons I am not in a hurry to put headphones on everybody when tracking necessarily. With care it is very possible to record in a lot of situations without any headphones involved.
(All in the same room, remember that!) With careful setting up everyone can hear each other and with careful mic placement etc you can still capture very good recordings of individual instruments with little or no spill on those tracks. Saves time too because a lot of time can be spent on headphone mixes in many situations where they are not needed at all. This is one area where the technology can intrude into the creative playing experience a bit.
It is possible to set up a small PA for guide vocals to be heard and still reject most of that sound in the mics. Some engineers are going straight for the headphone mix first off but I look it the other way and see if it can be done without first. When the headphones are not so involved the musicians tend to do what
Dean was referring just more naturally.