Hi Ebbie - All seated all the time , and different people leading each number , wether a song or a tune , with the rest joining in chorus or on whatever instruments !
We have done this as a 'Folk Club' thing at Festivals , though with 'our' people scattered through the room , rather than 'on stage'
together !
          Just need to make sure everyone involved DOES know what they are joining in with , and then you can have solos , duets , or whatever compbination you want , and ALL singing the choruses .
            Sounds like a fun event !