Using either individual or group based morality is problematic.
Depends on what you mean by 'problematic'. I think based on the context that you mean that two strong of commitment to either the individual or the group will make adhering to the principles generally considered 'good' to be difficult or impossible. In that, I think you are correct.
But highly individualistic or communal outlooks are not 'problematic' in the sense that they are internally coherent and certain people (or characters) do strive to live by them. So its not like they are nonsense even if we don't agree with them.
I think the answer to the conundrum you imply is that when someones commitment to the group or individual becomes much stronger than thier commitment to good, they've adopted a philosophy which - for whatever its merit - cannot be described in D&D terms as 'good'. Or in other words, strongly committing to a communal morality is 'Lawful' but not necessarily good, and strongly committing to an individual morality is 'Chaotic' but not necessarily good. In both cases you describe, I think that you are dealing with 'neutral' on the good/evil axis.
"Totally group based: needs of many outweigh needs of few: is a justification for anything to save lives, which can lead to atrocity. Example is the survivors issue: is it OK to murder someone to save the lives of the group? Again: extrapolated, can lead to anything being justifiable."
That could be anything from lawful neutral to lawful evil, depending on how readily and actively you choose to do evil. A lawful neutral philosophy might have a code of ethics which amounts to, "Repay good with good, but evil with evil." But if the 'needs of the many outweigh the needs of the few' philosophy justifies, 'get them before they get you', this is probably more like lawful evil.
Totally individual-based: will not do an evil act, not even to save the lives of the many, could be summed up as "my moral status is more important than other people's lives."
That statement I found particularly interesting, because I think it twists things in a way I hadn't considered before. I haven't decided whether or not this is particularly lawful or particularly chaotic, and I think the reason is that you've not really provided enough information. When you talk about, "my holiness is more important than other people's lives", the first thing that comes to mind isn't highly individualist people, but people who are highly commited to some external legal code of behavior on which basis they believe that they will be judged. In particular, in D&D terms I think Sturm Brightblade and the other Knights of Solamnia who are doing thier best to adhere to the Oath and the Measure and everything else be damned. So I think the real question of what may be motivating the person is, "If I break these rules I've set for myself, I won't be able to live myself", or "If I break these rules dictated by right authority, I will lose honor in the eyes of others and be subject to censure". In some cases, it might be some of both - certainly Sturm seems to be conflicted in that way - which suggests a more neutral and less lawful outlook on life.
Morality should not be telescoped into one of the other, but both should be considered.
Sounds like a 'neutral good' position, though I wouldn't know for sure until you stated how you resolved the situation when the needs of the individual and the needs of the group were in conflict.