I'm all about changing the rules to fit playstyle, but I first believe that one should completely understand RAW before any rules are changed.
Exactly. The rules have to be understood
in context.
For example, the initiative rules are set forth in the PHB under Chapter 8:
Combat. That's the first clue that they are intended to be used in combat situations, not just any time two "sides" become aware of each other's presence.
Then there's the first sentence of step two in "How
Combat Works" (PHB, page 133): "The DM determines which characters are aware of their
opponents at the
start of the battle."
Basically, everything irdeggman has said is correct.
Water Bob said:
Under the Combat Actions Outside Combat section, there is even an example of using the combat round to adjucate a non-combat circumstance.
(1) Yes, there are exceptions to the general rules. That's why we have DMs, because D&D isn't Chess or Monopoly; there will be times where DMs have to exercise some judgment, and that's why it's important for them to really understand the rules in context.
(2) Even the example presented in the DMG is a combat situation; it just happens to be between two people who don't actually want to
kill each other. The lesson to be learned, however, is that you use initiative when the order of resolution of actions is important: can Lidda pull the lever before Mialee can stop her? If Lidda wants to do one thing and Mialee wants to do another, and it makes no difference which action the DM resolves first, there's no need to use initiative and combat rounds. But if it
does matter, it makes sense to use combat rounds even if there's no actual "combat" occurring.