Integration of DNA isolation, amplification, and sequencing can be achieved by the use of polymerase colonies (polonies) and cycles of fluorescent dNTP incorporation. In this paper, we present four advances that bring us closer to sequencing genomes cost-effectively using the polony technology. First, a polymerase trapping technique enables efficient nucleotide extension by DNA polymerase in a polyacrylamide matrix and eliminates loss of enzyme during sequencing cycles. Next, we present two novel types of reversibly dye-labeled nucleotide analogues, show that DNA polymerase can incorporate these analogues, and demonstrate that the dyes can be removed by thiol reduction or light exposure. Using these nucleotides, we have sequenced multiple polonies in parallel. In addition, we have found that a high density of polonies can be achieved with minimal overlap between adjacent polonies by limiting the concentration of free primer in the polony amplification reactions. Finally, we have developed software for automated image alignment and sequence calling.