I actually have a full pally group. Like any other groups, they shine in certain situations, and are weaker in others. Instances are easily doable, but it's not a cakewalk.

I just ran through mana tombs last night with 4 level 66 pallies (catching up to my 70 before i level them together). they are each spec'ed differently enough to have all the improved blessing/auras. one is spec'ed mostly prot while the other 3 are spec'ed mostly ret though.

the new ret CC ability helps tremondously with single pulling one group member at a time. AE with consecration is doable (and extra deadly against demon/undead mobs when you can make use of exorcism/holy wrath) but nowhere near as efficient as my group of mages with improved blizzard.

again, biggest challenge is the melee aspect. a lot of mobs constantly move around/behind you, pushback, etc. and it's difficult to make sure that all of your team members are constantly in melee range. whenever they're not, you're suffering a noticeable drop in your dps.

but yes you can ae to some degree through consecration/holywrath/divine storm/avenger's shield/etc. The best part is with the short cooldown on your bubbles now, you can always gather up a few groups and then get a 10-12 second of invulnerable ae. but if you cant finish off your pull in that time and you pulled too much, it's a wipe.

with all that said, i love my pally group. they're very viable in groups and i danced through blood furnace/ramps with only 4 pallies at around 60-62. wasnt even a challenge except for the last dragon/rider boss in ramps,but even that was doable with only 4 62's.

good luck if you decide to pursue this! and melee groups arent that bad. my 5x dk group is even easier to run and melee with thanks to death grip, though less survivable.