I've considered doing this as well, but haven't yet. In my situation, the audience I've had in mind would be maybe 3 or 4 people, at a small local fly-in camp-out, so there is time to do the flights as well.
I see no reason it's not legit, as long as like Reed points out, you make sure each person demonstrates applicable levels of knowledge. Heck, many flight instructors renew their CFI certificates by going to FIRCs every two years that have many people in attendance. Also, Wings programs count for ground credit, and they can be attended by dozens of people - so there's precedence there.
Some considerations I've come up with:
- Must be a fairly homogeneous group as far as type of flying. I feel it's necessary to tailor the FR (even the ground part) to the type of flying the person does. So, holding a ground session useful for both the Cessna 120 hamburger-run pilot and the TBM "fly to large airports everywhere IFR at FL 200" might be an insurmountable challenge.
- Ensuring roughly equal participation - you'd have to make sure you're asking questions at random but covering everybody pretty much equally.
- Great benefit if, after the ground, you do the flights and have them ride along with each other.
- Timing - my idea was to do it in one day, so it would almost HAVE to be at some kind of event. If you have 4 pilots, it will take a minimum of probably 5 hours between the end of the ground portion and the start of the last pilot's flight portion.
- Managing expectations - I'm sure you tell every pilot who comes to you for a FR the deal that it doesn't necessarily only take one hour of flight. But in my example, if you have a few lined up one after another, you can see where this might be a problem.
- Generally in my experience, pilots only approach a CFI for a flight review when they need it, like by tomorrow. So doing a group ground session on one day and then flying several days later would require the right personalities and advance scheduling.
Edit: I see Phoenix beat me to a lot of these points, and briefer too!