Whether the other NPCs get involved or not I think depends on their alignment. I haven't tried to make such a scenario so you'll have to figure that part out unless someone else knows a way.
The way I normally do it is this:
CharacterSetFaction(CHARACTER_NPC,"Evil NPC");
There's also:
CharacterSetTemporaryHostileRelation
The second one might be more up your alley for this particular scenario. Never used that call though myself.
Also you might have to do the same thing from the other thread, set the calls for on DialogEnded. If you set hostile during dialog it will kill the dialog. Which might be okay depending on what you are trying to do.
