mightypawn: You play it the way you see fit, ofcourse, but I definitely read the rules very differently from how you do.
pasaav: I, too, would probably apply this as negative mods rather than positive mods, if I were to use them at all. Which I probably won't.
The PROBLEM, however, is that this is NOT what the rules say at all. They say nothing at all about how to handle this situation. The rules only say how to handle a one-on-one melee situation ("melee vs melee"). Being VERY kind to the rule book, and interpreting this as "situations where you attack a person in melee and this person also is attacking you, you get this general bonus to initiative", the bonuses is POSITIVE, meaning that if I am the stronger opponent, have one hand free and longer weapon, I get a +3 bonus to initiative. Which would give the opposite effect from what you describe; it would indeed cause the spear guy to go before the dager guy before the missile guy.
Had the rules stated "if you attack a person in melee, and that person is also attacking you in melee, you get the following negative modifications to initiative:", everything would be easy to understand, and take effect as you described. Wheter or not I'd agree with the mods is another issue, but at least it would be clear.
Another thing: does the init bonus, be it positive or negative, apply only to that phase where you execute your attack, or to all actions that round? And what if I attack in another phase than my opponent, do I still get the mods? And what if my opponent cancel actions before attacking me - do I still get the bonus? What if this cancelling happened AFTER I attacked? I think there are indeed MANY problems with these rules.