When I'm entering a crowd, my thought process and target priority goes something along these lines:
1) Is anything higher than me? If yes, it's the threat to be dealt with, I typically try to draw him into a fight a bit away from the crowd if possible. If there are multiple higher bandits, it's completely dependent on the day. If there's more than 3, I'll probably try to get over them. If there's 2 or 3 it's entirely dependent on how I'm flying that day/how froggy I feel/how many friendlies are in position to engage them.
2) If nothing's higher than me, what's the highest bandit? If he's engaged and moving away from me, I'll probably look for other prey. If he's got smash but I can catch him, I'll probably try to engage him. If he dives out under other bandits, I'm off. If he's climbing up to a friendly and I'm in position to pounce, I do so.
3) Every time the bandit I'm making a pass at either dives out or I get him, I return to step 1 and reassess.
I prioritize the planes more or less by a combination of plane capability and smash. If there's a fast plane like an LA, P51, 190 or 109K anywhere close to my alt and he's got even a bit of speed, he's high priority. Anything close to my alt with smash is a priority. Beyond that, it's all situational. I also try to keep my speed at 250-300mph or faster at all times unless the opportunity presents itself where I can go fangs out and saddle up for a quick kill and I figure I have time to regain E or at least speed before the nearest bandit can get to me.
I try to keep my 'rules' simple so I don't get bogged down too much in trying to figure out what I should be doing when the bandit makes a move. Obviously, there's a legion of variables that will cause exceptions to the above rules, like if I'm defending a base and I see a goon, but this is the gist of what's going through my head most of the time. I'm sure there are better ways, but that's how I approach it.
Wiley.