You need to submit everything at once, yes. Your spouse will need to get a medical exam in the country he or she lives in. You can find the list here: http://www.cic.gc.ca/pp-md/pp-list.aspx
Thank you so muc, if we are doing the inland sponsorship, can she do the exam from within canada? She will be coming here for 6 months as a visitor as we go through the process.