We've had this question before with no clear answer come to.
It's not possible to excess from a non-discounted ticket to a "railcard" ticket, so I assume the same applies to GroupSave - and as you say part-way individual tickets could be more expensive than the GroupSave anyway.
The most logical solution would be to buy two tickets for each group of 3/4 travelling and have them excessed to GroupSave - I doubt that this is possible and in any case it's not what the NRCoC specifies (since each traveller needs a ticket for at least partway).
I think in this case it's reasonable to say that there was no opportunity to buy tickets before boarding, and so buy on board (finding the Guard, if present, at the first opportunity). Certain TOCs would say buy full price tickets from the TVM, then buy GroupSave and ask for the tickets to be refunded at an intermediate/destination station.
edit: I think the correct thing to do is to buy a low-value ticket for each person and then exchange these for the GroupSave tickets. However, this would be a massive PITA for all concerned and I believe that most Guards would rather issue the tickets on-board than go through the 'correct' procedure - best to proceed with caution in SWT-land though.