The interactions really depend on how and for what purpose the spell is being used. If it is being used to allow them to slip by unnoticed in a dungeon, then it should indeed give the disguised party a slight advantage. However, this advantage need not always be given. A few examples:
The party enters a room in a dungeon, this is the first time they have encountered enemies in the dungeon and the party is disguised. The enemy may or may not get their roll to see through the disguise (GM discretion). Assuming the enemy either failed their rolls, or simply never got them, the party could be granted a surprise round if they choose to attack.
Later, they enter another room, by this point the sound of an raiding party has been heard, and the guards are suspicious of anyone that enters. Regardless of the result of their roll, these guards are ready for combat and thus a surprise round will NOT occur for the PCs... the NPCs might get one though... perhaps they decided they will open fire on the next thing to come through the door... I mean... they can hear the slaughter happening down the hall... they don't want to be next...
A small note on the first option... if the party just barges in and doesn't at least try to act like they belong there, then that should provide plenty enough reason to deny them their surprise round. You may look like you belong, but if you act like an adventuring party then your going to come across as one, regardless of what race you appear to be.
For non-combat interaction however, things get interesting... Since the spell disguises both your race and gender the interactions in social situations can be extremely varied... to the point that it can create a moment of confusion between multiple people interacting with a disguised subject. This moment of confusion may not have any penalties tied to it, but it does have a mechanical purpose... that's the point where you should roll your saves to see through the disguise. A reason to believe something is amiss has arised and as such action should be taken...
As for the interesting interactions that may happen...
Everyone might appear to be a different gender from one viewer to the next, if one viewer is of a different race they will see you as their race (which depending on the dialog might be rather perplexing for a moment)...
If your players use this spell, then it's your job as the DM to make the social encounters as awkward as possible... make a show of it... Reflective Disguise is the double edged sword of disguise spells. It takes no effort on your part to put up a convincing disguise but you have no idea what you really look like to the viewer, just that you appear to be of the same race and gender as them. So have fun with it... throw them off with a mixture of races & genders in locations to create some confusion... push some boundaries just to have a little extra fun (but remember, it's a game so don't take things too far)