Group work that works well: Directed group exercises with a "report back to the class" component (close readings of selected passages; collaborative brainstorming exercises; responses to problems in sentence structure, thesis construction, etc.).
Group work that leads to crushing fits of agony: Peer review. It doesn't matter how often you prep the students, how detailed the instructions you give them, or how long you loom over them, radiating menace. (And looming over people while radiating menace is mighty difficult when you're 5'3'', let me tell you. I have to settle for "just barely seeing over people's heads, radiating mild sternness.")
I'm apparently not the only one who has arrived at the latter conclusion, given my observations of various freshman comp syllabi floating about the web. My objections to peer review do not extend to upper-division or graduate courses, I should note; by that point, the students (usually) come equipped with the necessary skills, and are more often invested in the material.