I keep them all in initiative.
Its just easier to manage that way.
Unless they are to far away to really matter.
How do you handle combat that occurs between only a portion of party members (i.e., all in a tavern), yet still have the others interact (ignoring the ruckus) out of combat?
I agree with the Inquisitor on this one. The ruckus could easily pour over and draw in the other players.
Yeah, you know how heroes are! Always gotta stick their nose in other peoples business!
If there is a fight involving their friends they are bound to jump in at some point.
I would have the non-combatants roll for initiative also. I wouldn't bother to ask them what they are doing every round if they have said they plan on staying out of it. Most will hold their action or ready an action, just in case things change. I often have a few things set up to keep the extras busy, though. While most eyes are on the ruckus (the tavern example), a thief will take the opportunity to pick a few pockets, a fence will decide to offer some questionable goods, new people will enter to complicate matters, a lady of the evening will try to stir up some business, a serving wench will go screaming for the town guard, etc.
Yeah, I agree with the consensus so far. If a combat starts, and the other PCs are close enough to potentially become involved either willingly or not, then they join the initiative count. As to keeping up their conversation in rounds, I probably would just wait until after the combat to work that out since it is hard to have a conversation in six second bursts.
It is best for everyone to be in the initiative order. All of the scenarios Rabkala described will undoubtedly require some skill rolls like appraise, bluff, and sense motive.
I, myself, add modifiers to those situations. A PC not in combat may be keeping an eye on a friend and therefore less careful in his interactions with doxies, thieves, and such. I like them to take place during combat instead of after because combat has a tendency to ebb and flow and half-way through a conversation a PC will be more or less watchful of the combat based on how well his teammates are faring.