thanks everyone for your feedback.
I tried some shots last night.. couple questions.
1) when I shoot in auto mode... 1/60 F 4.0 ISO 1600 is the configuration shows up for the pictures .. when I set everything in Manual with exact same settings... the exposure indicator is around -3... which is not good...
When I lower the speed for the the correct exposure to 0 the speed is around 1/15 too slow... and pictures are over exposed... if I lower the ISO i have to further reduce the speed...
The pictures look just fine in auto mode or in M with the settings mentioned above.... so what is wrong with the exposure?
when we use flash (430) on camera do we still try to get correct exposure?
Nothing is wrong with the exposure.
If you're looking at the metering with the half-press of the shutter and the flash on, it will seem underexposed - the metering does not take into account the flash until you actually take the picture
. In other words, when you fully press the shutter, the flash will fire twice - the first, called the pre-flash, will be used for a combined metering of flash exposure and background, and the second will illimiunate the scene during the image (they're so close together that you often don't percieve separate flashes).
With the flash on and Auto ISO selected, it will default to ISO 400, which is a good choice although you could use ISO 200 or 800 if you prefer to set the manually.
What you're trying to do is balance the shutter speed to keep it high enough to freeze the people (meaning at least 1/60 s, preferably 1/100 s) but expose enough of the background to get some context. If you use your max speed with flash (barring using of HSS, which isn't really needed/useful here), you're at 1/250 s. In a typical indoor setting, that means almost all of the light for the exposure comes from the flash, so the edges of the scene may be a bit dark. a wider aperture may help, too.
Depending on the depth of field you need, and how far you are, f/2.8 might work if you're at 16mm. For example, at 16mm f/2.8 on the 7D, if you're focused on a subjet 8 feet away, everything from 5 feet to 16 feet from your camera will be in focus - that's a reasonable DoF even at f/2.8. You can estimate with a DoF calculator
I'd start with manual settings of ISO 400, f/4, 1/100 s and see how the histogram and scene look with a flash shot (remember - the flash will provide the light to make up for the underexposed ambient, it just won't be apparent until after the shot).
Definitely bounce the flash off the ceiling...but hopefully the ceiling is white, else you end up with a color cast in the shot. If the ceiling is colored, head to a craft store for a large piece of white foam core, and have someone stand on a stool behind you and hold it over you at an angle, pointing the flash head up and back to bounce the light off the board (you'll have to play with the angles to get the positioning correct).