I ride for exercise all the time in group rides and do not have a problem keeping up. As you mention, you can always start in a low gear and work your way up. As mentioned, even on the steepest hills, I have managed to climb without walking. The harder part tends to be "keeping up" with geared bikes on the downhills when they are traveling at close to 40mph and my legs are spinning like mad. If they slow down afterwards, I can always keep my rythm and catch them, but if someone attacks at the end of the hill (if I'm riding with racers), I can't always keep them within reach.

I general keep up with the regular riders very well. In fact, I am usually in the lead when I'm not on my tandem. Having said this, I have had some trouble keeping with the fastest group in a different group of riders that race a lot. I rode with them last weekend and there were many times we were spinning at close to or above 30 mph. Even with my high gearing, this means I was pedaling at 120-140 rpm. I might gear up even higher and try again.