<p>We are currently evolving our development processes in an effort to become CMMI compliant (we will start with level 2, and move up from there).  We are trying to locate a tool that is inexpensive (or free) that will allow us to develop requirements in the spirit of CMMI.  In other words, we need to be able to enter our requirements, track changes to them, provide alerts to individuals when requirements change, perform traceability, etc.  Our projects are typically small (typically 3 - 7 developers and a tester or two).</p>

<p>We have looked at many of the commercial tools, but they cost more than we are able to afford.  We looked at a few on SourceForge (OSRM and others) but could not find anything that was sufficiently mature that also had the features that we needed.</p>

<p>We are looking for suggestions for a tool that meets the above requirements.</p>

How about starting of with a Wiki? We use
TWiki
but there are many others available. The wiki we uses
sends an email when any pages change
stores the history of changes to each page
by using the auto-linking of wikis you can create a hierarchy of requirements
This seems to cover most of your items. Wikis like TWiki have plugins which may also help you.
If you only have 3-7 developers on a project using one of the big commercial tools may be far too complex for what you need.