The "descending attack rolls initiative" has been used in a few sessions now. Personally, I think it works well, but it needs a more explicit structure. Here's a possible step-by-step cheatsheet for combat flow:
1. The GM describes the initial setup, monsters, positions, terrain. (note to self: be a better GM here)
2. The players should have a Speaker. They confer between themselves regarding the course of action, then roll their actions (if unsure what to roll, ask the GM, but see 4. below). In the meanwhile the GM goes on to pick actions for his monsters and roll for them.
3. The Speaker announces the Party's highest roll, the GM compares it to his highest. Then resolves them. Then call out the next etc. If you have improved initiative, it should be included when the Speaker announces the roll.
4. Regarding rolls. If your action involves a roll (attack, etc.), that's the one we'll use. If you try to do something that doesn't normally involve a roll, use the following: most of the time that's either a) a move, in which case you roll +Acrobatics (or Dex if you don't have it) or b) you cast a spell, in which case roll +your caster level+spellcasting ability. That should cover about 99% of actions in combat. If it's still not clear, GM decides.
5. Regarding actions "on stack". So you might be attacking that orc, but the enemy shaman casts Stun before you get to resolve your attack. Pow, stunned. You don't get an attack. Simple. If you drop your enemy before his attack resolves, he doesn't get an attack.
So, basically, if you're fighting some smaller foes and a big foe comes after you, you better revise your tactics, because the bigger foe has a higher roll, and is going aggro on you. It has the upper hand and you need to either get out of its way or maneuver to get the upper hand again.