Since you have setup the advanced settings in the list so that users can
only see their own items alerts don't mean anything. No one else (except
the admin) can see the items that a user enters since its based on
ownership, not security. Since the owner created the item there it makes no
sense to alert someone else to something they can't see anyway. As the
error says. To do an alert you'll either need to do it in a workflow
manually or change the settings of the underlying list and manage visibility
with security on the actual list items (again, probably assigned through a
workflow or an event handler).

I am struggling with the way to configure an end of day workflow. Typically
workflows (and hence mails) would be triggered when an item changes in a list.
Is there a queue I need to build to make sure that the a single mail
notification is send at end of day (by parsing the contents of this queue)?