You can only have four players in the Backyard Battleground before joining a game, but more can join your party once you are in a multiplayer match. If you're asking if it will keep all players on the same team when there are more than four in a party... Hell, it has trouble keeping three players on the same team sometimes.
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@DASHHouse Yes you can but as @TVJunkieXbox said, your team will probably split at some point (while starting a new round), specially if you and your friends are top players. Teams tend to balance themselves and totally ignore groups/parties, which I personally endorse and support the idea of avoiding multiplayer harassment at any cost.
It is also fun to play against your friends, that's what makes a good player.
ciao
