So, I'm looking for both a RAW and RAI ruling here. General DM advice/houserules would be appreciated as well, especially if you have experience with similar scenarios.
About to start a campaign, and one of my players is looking at playing the Picaroon Swashbuckler archetype, which is focused around the idea of wielding a rapier in one hand and a pistol in the other. As such, he wants to be able to get into melee range (5 ft), stab with his sword, then fire his gun.
Now, there are rules regarding firing a ranged weapon while being threatened (you take an attack of opportunity) and for firing a ranged weapon into a melee (-4 to attack rolls unless the enemy is 2 size categories larger, in which case it's a -2). He's already planning to take some feats that'd remove the Attack of Opportunity (Point Blank Master), but we're unsure if the rules for firing into a melee still apply when you yourself are in the very same melee (after all, since you're in it, no one can step in your way). This is especially uncertain if the enemy is engaged in combat with an ally of yours as well as you (say, you're flanking the enemy with one of your allies). He also is frustrated with how difficult it is to pull off the character concept and how many rules he has to fight to make it work at all (and even then, feels that he'll be underwhelming).
Is there any rules specifically for firing into a melee that you yourself are in? If not, should I waive the rule regarding the attack penalty so long as he is in melee?
Thank you for the assistance