any group with more than 5 people is a raid.
To create a raid, you first create a group, then go to your raid panel (social) and click convert to raid.

You can convert to raid at any time, but cannot convert back to a party. You need to disband the group and reinvite people (even if there are only 5 people in the raid)
Unless they are speciffically tagged as 'raid instances' (usually level 60 or more) you will be able to enter the instance as a party and create the raid inside when more people join.
Once the leader of the raid enter the instance, other members of the raid/group automatically get into his instance when they go through the portal (unless they are already saved to that instance - again this is only for 'raid' instances and daily heroics)
this is my understanding anyway

If a toon happens to be in a separate instance (for example was already in the instance when he got invited to the group/raid), just zone him out and back in.