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It is an interesting one and I have found myself gravitating to narrative based initiative for times when it makes narrative sense and otherwise just use the rules as is.

For example, if 2 sides spot each other at 150m and then start taking cover and firing then I'd just use the cards. Here it would not make sense for the person with a pistol to go first or get a bonus . Also, while rolling CUF at the beginning might make sense - eventually it's going to boil down to people missing turns when they start failing CUF rolls anyway and the initiative order effectively starts breaking up. One could argue that well seasoned soldiers should be able to react faster etc, but in this case this can perhaps be solved 80% of the time is they can instead have deemed to have surprised the enemy if it makes sense in the situation.

For situations where gunfights are tight and quick - especially on the first round or two - then why not just go full narrative - let the pistol guy go first if it's a matter of drawing a pistol and firing vs another guy who has to unsling and shoot a rifle in a confined room.

I don't think it's appropriate here for tw2k due to the nature of CUF rolls, but I've adopted a narrative style initiative system for many of my more "narrative" rpgs. I can't remember where it was originally from, but I think it was some super heroes rpg. Basically this is how it works. Everyone gets their one action in a turn. The first character to act is the one that makes narrative sense. The next to act is the one that this first character attacked / acted against (because it's more punchy and dynamic that way), unless there is a very good reason why it should be otherwise. If you go with otherwise then the first character gets to choose who goes next - which could be friend or foe. Repeat - and that's it. You get an interesting tradeoff between passing the next action to a friend vs a foe (noting that the GM get's to choose who goes next for foes). This wraps around to the next turn/round also - so if players pass the initiative order in turn 1 amongst themselves in order to "go first" then they set themselves up for the opponents to get 2 full sets of action (turn 1 and then again on turn 2) if they are not careful. However, I do not think this would work well for tw2k because CUF and getting suppressed are big deals.

All good points. The first round or two of a firefight tend to be pretty critical in this game.

A common thing to happen in our games (other than tw2k) is that somebody suddenly decides to start s fight, and one or more parties have been waiting to react on anything suspicious. More or less. How would you resolve this in tw2k? Make a skill check of some sort to see who has been surprised?

If my players are ready for an attack (edit: because they have said so and mentioned how and why the suspect that) I give them an extra card to choose from. If any side has guns already drawn and pointed at someone, I treat that as they are in Overwatch, so if anyone starts a combat, we draw init cards but the guys with guns already pointed at someone can stop the actions at any time and execute the Overwatch.

A common thing to happen in our games (other than tw2k) is that somebody suddenly decides to start s fight, and one or more parties have been waiting to react on anything suspicious. More or less. How would you resolve this in tw2k? Make a skill check of some sort to see who has been surprised?

Isn't that just "a fight starts, everyone draw initiative" situation? I don't see how this is a special situation... if everyone is waiting to react to anything suspicious and someone announces intent to harm, have everyone draw initiative. Maybe that person who announced harm gets a good initiative, maybe they don't.. maybe they decide to go for their gun, but someone else is faster on the draw. If the narrative is that everyone is keyed up and looking for an excuse, then it's just "a fight starts" in my opinion.

If you really, really wanted to appease the person starting the fight, you could let them draw first, let them draw two and keep one, or let them swap with anyone on their own side for free. But I'd just run it as "and now we're in combat, everyone draw".

The way Fenhorn describes using overwatch works well for a standoff type situation, where some people have guns drawn and others don't, for instance. I also tend to give characters whatever out-of-combat bonus the situation would prescribe. Example: characters have arranged that if the one doing the talking makes a certain hand signal, the sniper takes the shot. That begins combat. But rather than checking for initiative right away, which would kill the excitement, I give it to the sniper and resolve that shot. Even though it's the first round of combat, he's obviously been doing a slow aim from a supported position... so he gets those bonuses. And so on.

One other idea I've been playing with is giving anyone who was prepared for the fight an extra fast action in the first round. Like cheeplives pointed out, this really only plays if only *some* of the participants were particularly ready or unready. In general I think I like this more than penalizing one side or another some or all of their actions, because they shouldn't be completely flat-footed. This isn't a true ambush, and a fast action doesn't let you get off extra shots. It does let you draw, aim, and fire. Or draw, fire, take cover. I would truly only use this in a case where one group has a plan that seems like it would effectively get the jump on the other guys. For instance, they dump a flashbang into the room, or trigger a remote distraction, or something like that according to a known plan. As you can probably tell already, I'm not a big fan of adding yet another layer of die rolling to determining initiative, but you could make this bonus contingent on a success of some sort.