ok, so I was bored and decided to look up some stealth rules, and came upon the following interpretation, which I find believable:
Attacking automatically breaks stealth, regardless of line of sight. Because of the noise made by attacking, any nearby creature knows what square(s) you are in after the attack is resolved even if they cannot see you (or the square). Therefore, there are entitled to make a targeted attack against you, although at a -5 penalty for total concealment. The penalty is the result of attacking an invisible creature.
Also, a new stealth check can only be made after a move has taken place. Even if line of sight is lost, a creature can't enter stealth if it remains in the same position it was before.
Finally, any creature attempting to enter a square occupied by a stealthed creature automatically breaks the stealth. Again, attacks would have the -5 penalty for total concealment (invisible opponent).
Does this sound reasonable? I just want to figure out the ground rules before going forward, because the way we were doing it last time is campaign-breaking in PC hands...