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Research has identified applications of handheld-based VR, which utilizes handheld displays or mobile devices, for developing systems that involve users in mixed reality (MR) without the need for head-worn displays (HWDs). Such systems can potentially accommodate large groups of users participating in MR. However, we lack an understanding of how group sizes and interaction methods affect the user experience. In this paper, we aim to advance our understanding of handheld-based MR in the context of multiplayer, co-located games. We conducted a study (N = 38) to understand how user experiences vary by group size (2, 4, and 8) and interaction method (proximity-based or pointing-based). For our experiment, we implemented a multiuser experience for up to ten users. We found that proximity-based interaction that encouraged dynamic movement positively affected social presence and physical/temporal workload. In bigger group settings, participants felt less challenged and less positive. Individuals had varying preferences for group size and interaction type. The findings of the study will advance our understanding of the design space for handheld-based MR in terms of group sizes and interaction schemes. To make our contributions explicit, we conclude our paper with design implications that can inform user experience design in handheld-based mixed reality contexts.