Card Initiative

Here's what I do in my own little games where I use cards: 

1 card per unit 

No cards for command units (act on their discretion) (or sometimes we 
insert 3 commander's option cards and the commander can collect them 
and then play them at any time to take his turn - but he only gets 
one activation). When we allowed this kind of pre-emption, it wasn't 
mid-activation. It had to be before or after.

Overwatch/Reaction figure is a pre-emption. Since it is really "last 
turns fire" (for Overwatch), the unit's card is still valid when it 
comes up. For Reaction Fire, the units activation is consumed, so the 
card is ignored when it turns up.

If two units should go at the same time (any situation where a card 
has come up and an officer wants to activate someone or reaction fire 
is desired), we roll QD vs. Ldr. Whoever beats their Ldr by more goes 
first. (You could also do QD vs. QD opposed). This sometimes happens 
in cascading interrupts. 

Case:
Red activates (by card draw) unit X. Blue doesn't like that, so Blue 
Leader wants to pre-empt. So he rolls off with Red X. If he preempts, 
Red Leader may decide he wants to try to pre-empty Blue Leader. So 
they roll off. Once a leader tries a preempt, he's activated (can't 
take it back) but he can spend his actions however he likes (thus if 
the order he was going to give is no longer viable, he can issue 
another)

This works and is fun. Chaining of events doesn't happen that often.