I think priest is perfect for this group as priest healing is very reactionary. Druid healing requires that you *know* who is going to be taking damage and that way can have all your HOTs rolling on them. It took a damn long time for me to get used to using a druid with my 4 DK group and I imagine it would have been tons easier to use a priest. 11k health doesnt seem like a lot for your pets in lich king, but honestly I have no clue as I havent had a pet class in lich king (well except for DK pets, before nerf my pet had around 26k health - lol).

Letting them all fight for aggro makes AOE healing that much nicer. I used to single target heal, but I found it was just easier to AoE heal. My stinking instant AOE heal hits pets for over 1000 at 64 and it's not even glyphed yet. Also I macro'd in the hunters tossing a heal once in a while. The hunter glyphed heal is pretty sweet. It's a lot of healing going off (which pets need) but I worry that the wall will come in Lich King when the trash just does too much damage. We will see!

Also I wonder if maybe you could use some more sta gear? What's your gearing like? I know pets have a few talents to get them more health, you probably already have them tho...

edit: dont forget, priests get a very nice health buff that pets can also receive. 700 health at 60 is no joke for a buff!