1. In your the first sentence "Die Gruppe unterhaelt/ unterhielt ..." you could use subjunctive in the sentence starting with "wo" because it is indirect speech. However, this is not necessary here.
2. The correct subjunctive in both the present tense and the past tense example would be "sollten". Hence, the original (present tense) story obviously uses the indicative mode here.
3. In your past tense example: If you decide on the indicative mode it should read "sollen" (as there is no back-shift in German indirect speech). If you decide on using the subjunctive mode it should read "sollten" (see 2 above).
a) The rules when to use indicative mode and when to use subjunctive mode in indirect speech are quite complex, if you really would like to know all ins and outs in the German language. However, there is one rule that always works: Use indicative mode in informal, oral communication, and use subjunctive mode in all other situations.
b) A different question is which grammatical verb form to use once you have decided to use the subjunctive mode. The rule here is (and this is what mfg was having in mind): Use "Konjunktiv I" unless "Konjunktiv I" is identical with present tense indicative mode. In these cases use "Konjunktiv II".
c) As I do not know if you know the terms "Konjunktiv I" and "Konjunktiv II", here is an example:
er, sie, es finde
wir, ihr, sie finden
er, sie, es faende
wir, ihr, sie faenden
As you might observe, in this case, Konjunktiv I is identical with the present tense indicative mode in all cases except "er, sie, es finde". Hence the rule in b) implies that we use the following forms in indirect speech:
Konjunktiv as used in indirect speech:
ich faende (= Konj II)
du faendest (= Konj II)
er, sie, es finde (= Konj I)
wir, ihr, sie faenden (= Konj II)