If your wildly inaccurate summary is what you got out of it, then yes, you need to take more time to think.So to summarize, if you like it it's magic and it's good, if you don't like it its not magic and it's bad. Gotcha. I feel like I have been foolish to engage in this conversation. I am going to take some time to rethink the direction of my life.
It isn't restricted to (demi)human. There is a weird disparity between how effective the assassin is on a surprised target and a helpless one. It's like they forget all those anatomy lessons. They should have included stunned/paralyzed in what you can hit with death strike.
I'd definitely have advantage on them, being unseen and hidden, but they'd have knowledge of someone in the combat, and thusly not be surprised.But you don't need surprise to get sneak dmg, and surprise is determined on a character by character basis, so even if you are the only sneaky member of a clanky plate armor based party carrying torches, you can still surprise anything that doesn't succeed on perception vs stealth check. Knowledge of your three un-stealthy friends does not imply knowledge of you.
"Any character or monster that doesn't notice a threat is surprised at the start of the encounter" - so as long as they notice any one of the three unstealthy party members, they're good to go.
If you run it as a Group check, as log as 50% (i.e. 2 in your example) beat the target's Passive perception, then all the group would count as succeeding and the monster's would be surprised.