How's leveling supposed to work in this game? Should you turn on XP for all party members? Or should you only have it on for the teammembers you want to use, and level the rest up through training if you want to use them?
Also, are there any time penalties in the second half of the game? Or is it OK to skip days in your barony to get rid of quests and get dat BP?
Just leave it on for everyone imo. You can still make level 20 by the end of the game and sometimes you will want to or have to swap guys in and out, especially in the late game. The game is balanced around having XP sharing enabled at all times.
You CAN switch it to active party only at the beginning... but as Desiderius wrote, the gains are not significant and soon you should turn it off.
However if you play a skill monkey, there are possible huge gains from passing skillchecks with the option "Only skill user gets experience from skills". Early on Trickery trap disarming provides a lot of xp.
In the 2nd half of the game, you should focus on Persuasion, however. There's something like 2 levels worth of xp in late game Persuasion checks (particularly during the Codex side-quest in Act 5!). This least to level 20 during Act 5, rather then at the end of the game.
Note this actually helps your other party members long-term, as there are at least 2 instances troughout the game when you get separated and the rest of the party xp-matches the main char upon rejoining.