Auto swap weapons?

[Stabbath]

I read in the manual that your party's AI can be set to auto swap weapons, from range to melee. How?

Is there a penalty for using range weapons in close quaters like in many other games?

[mr_sir]

I think you can set that in the options screen. Not sure about the penalties for using ranged attacks in close range, but I never noticed any significant problems with it.