I'm not sure THAT many people are running full 5 man homogenous groups to be honest.

The first team I took to 70 was pally, priest, mage, mage, hunter.

Your question about questing vs. instance grinding has been answered many times before, so you should have no trouble finding that with a quick search. There's even a full section about it in the Wiki, which I found just by typing "leveling" into the Wiki search....

All the information you need is already here