Rounds last 20 initiative counts. Initiative rolls over 20 go in the previous round, under 0 or under in the next. Initiatives are changed to modulo 20 (so 25 -> 5, -2 -> 18)
If someone is not aware of you then they get a -10 penalty to initiative.
Until you have had a turn during combat, you suffer a -5 dodge penalty to AC and can be sneak attacked (uncanny dodge negates this penalty)
All rounds are full rounds, so no partial action surprise rounds.
Are they reasonable? I'd guess that they mostly help dex-based weapon users, though if I'm allowing some craziness please let me know.
As usual it does nothing to handle the dread "three body problem". It is absolutely the bane of every surprise rules ever made. It goes like this:
Three guys walk into a bar and they all hate each other.
A Really Stealthy guy.
A Really Observant guy.
A really Normal guy.
Both the average guy and the stealthy guy see the observant guy and vice versa. But the average guy and stealthy guy don't see each other. Surprises for who? Initiatives when?
It's a big problem, and that sort of thing is pretty much mandated if you atually have a stealthy rogue and a toddering cleric in plate armor.
Player A gets 2 full turns before B even gets to go, and 3 turns before C gets to go. And that's just broken.
An Iaijutsu Master going hardcore for initiative could get a roll over 40, which would mean 3 rounds before the end of "turn 1", and at least 3 actions before anyone with a negative initiative actually went guaranteed. (possible even 4).
Well, the numbers don't really matter - unless you allow people to re-roll their initiative.
Stealth bonuses only apply if the target doesn't know your presence. That's all that you need - you don't need to give a big order of operations. If Joe doesn't know Jane is skulking about, and beats Jane on the initiative roll - Joe still doesn't know about Jane without another ability.
Saying your initiative have a 10 DC to act the first round is probably doable... But a round is an awful long time to have blades and spells flying and for people to not notice.