I've been using MP3Gain for a couple years and stupidly during that time, all I've been doing is throwing my mp3's into MP3Gain and clicking Track Gain to 95dB so they sound like they're at the same volume.

I have a 40GB mp3 album collection, all properly tagged and separated by folders. From what I understand, I can undo the changes that I've made from within MP3Gain by using 'Modify Gain -> Undo Gain changes.' Is this correct?

If so, what would be the recommended settings for normalizing my albums? I'm looking at getting a better sound system for my computer and I get the feeling that once I do, I'm gonna discover some distorted mp3s in my collection.

IMHO, if you are just using listening to the mp3's from your PC, you should try to undo any changes, and apply ReplayGain tags instead, as several players use this today.

MP3Gain are great to get an average volume on players that do not support ReplayGain. You might have noticed the "clipping" flag when you've applied gain on your files, and you may be able to hear distorition (however usually I don't).

If your files does not contain the undo-information, you can set MP3Gain to "Don't clip when applying Track Gain" and apply to all your files. This way you will be sure that no clipping occur, but tracks in albums will have different gains.