Milotic@Leftovers
Surf
Ice Beam
Sleep Talk
Rest - if I use rest, and milotic is saddled with the sleep status will it gain a 50% defense boost or because the sleep status was self inflicted will marvel scale not take effect? Also When the marvel scale takes effect will there be something showing that marvel scale took effect? i.e. like when a pokemon with intimidate comes into battle or when u raise one of your own stats using a move like clam mind

Milotic @ Lefties
252 Hp 224 Def 32 SpDef
-Ice beam
-Surf
-Sleep talk
-Rest
(from Smogon)
Rest, activate Marvel scale and Sleep talk moves. Surf takes out lots of pokemon, Ice beam mainly ofr dragons but grasses will work too. Walled bu water pokemon.

You may also want to try Hypnosis set which can be good set for Set-uping (Hypnosis -> Sweeper in -> Stat-up -> Sweep).

also another question i have is if marvel scale effects remain after you wake up or only when afflicted with a status? If marvel scale's effects remain then you you once again use rest and continue raising you defenses?

Marvel scale only affects in status condition so no status, no bonus.