Historically there were stories of reward tickets booked with elite miles getting elite treatment, even for non-elite passengers. I haven't done it in a while so I cannot speak to whether that is still the case.

You'll certainly be able to get them seats based on your status as the reservation will be in your account. For baggage I'm not sure what would happen if they are not tagged as elite. Will two bags not be enough for you as a group? You'll all be able to board and use the ticket counter based on your status.