I'm a bit confused. I'm sure I'm way off here, and I apologize in advance, but it sounds as if the only dialogue you've experienced in games are unit chatter in RTS games and some FPS taunts. Way off, right?
Or wait...are you saying that these panelists claim that minor dialogue like chatter and taunts--opposed to major dialogue like character conversations--are a large part of a writer's job in a studio? I really can't imagine that, to be honest. In any case, I don't think you'd need to worry about showcasing any samples of this. If your general dialogue is any good (and obviously represented in your portfolio), any sort of talent for minor dialogue like taunts and one-liners are more or less a given, and I honestly can't see this being a selling point or deal breaker for any prospective employer.
Also, chatter is totally contextual, isn't it? There's really no way to actually sample it without sound really, really cheesy and senseless.
They didn't say it was the most important part but they did mention that it was the most excruciating and that obviously depending on the genre (RTS, some MMOs) that can be a long process. But I agree with what you said, if you can do and prove to be successful at the regular dialogue, the minor stuff isn't anything to showcase.
Idling dialogue does not make a good showcase, especially if you have to explain it.
Never put anything in the portfolio that cannot be understood without explanation.
The best format is one that's easy to read. Like movie script format for instance. Yes, we don't use movie script format for games, but we don't really have just one standard format for voice-over scripts or for onscreen story text. The main thing we do is number the lines so the programmer can just call them up -- and the numbering system depends on the filenaming convention in use for the project. You get to make a format that makes sense for you and that's easy for an interviewer to read.
Thanks as always Tom. I'll focus on scripts then. Do you suggest scripts we've written (film, animation, graphic novel) or should I write a game specific script?