If I havn't read the rules wrong, you don't get any disadvantage by shooting through squares occupied by your allies. I have always thought this been strange from a flavor-perspective - they are your allies, but still in the way - so I thought about giving my players a small -1 to attack rolls when doing so.
Is this a bad or a good idea? Does it really make a difference, or will all my players' ranged fighters now suck?
I actually apply cumulative penalties for each obstacle in the intervening space.
so, to answer your question: no, I don't think that such a thing is too harsh. really, what's a "-1"? wow, a whole 5%.
It was left out of the rulebook for a good reason, because it's just an unfair penalty applied to ranged characters.
There's been some pretty hot debate on this topic here:
community.wizards.com/go/thread/view/758...
Most things that can be said, have been said 
For math balance reasons, if you give out a new situational -1, try to find a way to give out a new situational +1 (or more, depending on how rare) to be fair to the class builds you have penalised.
For instance:
-1 for each ally blocking shot
+1 if target is not in melee with any ally
. . . of course this will all balance out in average, but if you feel you must have actual penalties/bonuses for these situations, then its your game.
What I do: I incorporate un-modified situations "into" the fluff. I.e. if you miss and an ally is in the way, as a DM I might say "You didn't get a clear shot, the fighter is in the way". It makes a point that it is a valid reason to miss without making a deal about it in the mechanics.
If you think of it as odd, then look at it this way: The 'allies are obstructing me' is factored into the normal attack number. If they aren't then the underyling 'penalty' is countered by the bonus (Prime Shot, etc).
It was left out of the rulebook for a good reason, because it's just an unfair penalty applied to ranged characters.
+1
If you implement penalties to ranged attacks because your allies are in the way, then you should, by the same logic, apply penalties to characters using reach weapons when attacking an enemy "over" an ally, and to a character in melee if an ally is adjacent to him on his sword-hand side when using a slashing or blunt weapon (since being careful not to hit the ally beside you limits your ability to swing your weapon). Of course, this latter instance implies bringing back facing, which could mean penalties to attack enemies behind you (or bonuses for them to attack you) and a host of other annoyances that were rightfully dropped between 3.x and 4e.
And remember, you are not 5 feet wide (hopefully). A character doesn't take up an entire square, and most of a square is empty space. D&D characters are supposed to be heroic, especially in 4e, so I personally don't think the idea of shooting when allies give you a clean shot should be so outrageous that penalties should be applied to an attack. Besides, when players realize that they can't effectively play characters with ranged attacks when other PCs are in melee, they'll just stop playing characters with ranged attacks.
Enemies already grant cover to their allies behind them. Stacking more penalties for cover on top of that will significantly decrease a ranged characters ability to be effective in combat. The last thing you want is your ranger to be useless against anything behind the front line because his fighter and the enemy is standing in the way. It would make for a very boring character when you are useless to the enemies you should be able to hit from a distance.
I don't look at it as a balance issue as much as it is "another thing to calculate" issue. Omitting that penalty is part of the simplification of DnD, along with such rules as buff tracking, diagonal movement, square circles, and combat advantage. If you bloat combat too much with detailed penalties and bonuses, it slows down the game.
I don't see it being the apocoliptic balance changer that some people do, so I say if your group likes the flavor and you're not worried about combat slow down, go for it.
It's not exactly an unfair penalty on ranged characters. Ranged characters don't take quite the risk that melee characters do, so giving them the odd penalty is hardly unfair. But, ironically, it /does/ unfairly penalize melee characters, who have to constantly worry about blocking thier ranged allies' lines of fire. In 3.x, the penalty was substantial, and the rule for calculating cover made it hard to avoid. We had a dedicated archer for a while, and it was a real pain leaving him these perfectly clear lines of fire straight down a row or column of squares.
Reducing the cover penalty and eliminating any drawback to shooting 'through' allies was a good idea, because it made it more practical to include cover (since it didn't swing the combat too preposterously) and made it easier for ranged and melee characters to work together without intraparty conflicts.
It would certainly be an interesting addition to the tactical level of play, though, to have a non-trivial penalty to attacks with allies in the way, or a possible consequence for shooting through thier squares. But, it would only be worth implementing with a group where /everyone/ could handle the consequent tension, and at least some of them (preferably including the dedicated ranged types) enjoyed that tactical challenge. Otherwise, sticking to a minor situational bonus or two when a clear line of fire can be provided (like, as someone pointed out, Prime Shot - a great way to visualize that feature, BTW) would be better.
I don't look at it as a balance issue as much as it is "another thing to calculate" issue. Omitting that penalty is part of the simplification of DnD, along with such rules as buff tracking, diagonal movement, square circles, and combat advantage. If you bloat combat too much with detailed penalties and bonuses, it slows down the game.
I don't see it being the apocoliptic balance changer that some people do, so I say if your group likes the flavor and you're not worried about combat slow down, go for it.
I think that I tend to agree with this.
OTOH, with all the other potential modifiers already present, what's one more gonna do? (and that can be taken either way)
This is my homebrew solution
Nah no penalties...if they miss badly enough however then there is a chance that the arrow/bolt/dagger/shurikan/donkey will hit a different target in the line of fire.
You have to be able to apply fair chances of such to happen on the fly, depending on the movements going on, timing, confining spaces etc.
Usually whenever anyone fumbles and there is an ally in range of the attack, be it ranged or melee, I will have the fumbler roll to hit his ally.
Alternatively I have a homebrew fumble table where hitting an ally is just one possible outcome...Also included is a critical hit table which has a chance to hit additional enemies, so there is some balance.
Ranged characters in my worlds have never felt penalized, but then everyone is urged to be aware of the realistic possibilities of odd events in combat.
> characters do, so giving them the odd penalty is hardly
> unfair.
Melee characters are compensated for that in other ways.
Also keep in mind that each square is 5ft by 5ft. A medium character isn't taking up the entire square all at one time.
I'd also think about why you are wanting to put in a penalty. In an open area battle it would make ranged characters move around more but in smaller areas it would end up just by annoying and take away from the fun.
This would make ranged characters mostly useless if they're having to take constant penalties. They're quite balanced as-is.