It does not matter which version you have.
if you link a group you always have three parts:
1 - the pivot object (bright orange in 2.53/bright violett in 2.49)
2 - the group objects as instances (dark orange in 2.53/dark violett in 2.49) of
3 - the orignal objects (dark green in 2.53 and 2.49).
The original (3) are not required and maybe not even visible. so I’m not talking about them.
The group instances (2) are not accessable by the Blender GUI. You will always select the pivot object (1). If you parent you always parent the pivot (1). While in Blender the group instances are parented to its pivot.
The problem you got is that as soon as the BGE starts, the pivot has no relationship to its group anymore. There is no way to tell which pivot belongs to what group objects and vice versa.
I wrote a library for 2.49 to handle this problem. Look for the LinkLib in my profile. To see it in action check out the MouseOrbiter. It is using this. I have no idea if they run in 2.53.
I hope it helps