Check out This Link. It lists the Wizard spells for IWD and notes the schools. What I'd do is check out what each specialist school would bar you from using and decide from there whether it's worth specializing or not.

I didn't specialize for my first run through, but that was because I played with a 3 character party, so only had one character with arcane casting ability, so didn't want to lose any spells. For my second run, I went with both a CLC/Illusionist and a Bard in a 5 character party (the latter covers the spells the CLC/Ill can't cast).

So where your party has both a mage and a Bard that can cast arcane spells, I might be tempted to specialize the mage.

Thanks for the link. I decided to make an illusionist, though I'm sure not having minor globe of invulnerability will come to haunt me.

Globe of invulnerability isn't very useful in a party game since it only affects the caster. I didn't even use it when soloing.

Illusionist is the best choice for the specialist school. Besides the best spell selection you also get better rolls at creation since you always get at least 16 dex.

You can get this character even far more powerful if you start as fighter (gets more HP, can start with 18/.. strength, specialize in bows and 2-handed swords and equip more things) and dual after 3 levels, but if you have 2-3 shoots per round for 6-11 damage each you might become too lazy to use mage spells.

I thought you couldn't dual to specialist schools.

Gnomes can.

You can. Just note that each specialist school has a secondary ability score requirement, so you must have a minimum score of 17 in that ability in order to dual class into that specialist school. Here's a list:

Abjurer 15 Wisdom
Conjurer 15 Constitution
Diviner 16 Wisdom
Enchanter 16 Charisma
Illusionist 16 Dexterity
Invoker 16 Constitution
Necromancer 16 Wisdom
Transmuter 15 Dexterity

Well after I do more I learn more about the game. Here is what I am thinking of making:
Dwarf-Fighter/Cleric (Buffs)
Half-Elf - Ranger/Cleric (Heals,CC, and Debuffs)
Human- Fighter dueled to Mage at level 3 (thinking about making this theif/mage multiclass)
Halfling- Fighter/Thief (or should I duelclass this one)
Human-Paladin (optional)
I realized I don't really need the bard.

That should work out fine, although I'd be tempted to fit a Druid in there somewhere (they have some great spells). But you should be fine with that group.

As for your Human FTR, yes you can specialize him when you dual to mage, but see my post above for the secondary ability requirement. I see you edited. Yeah, you could go Thief/Mage (if Human you'd still have to dual class though - I'd probably go with an Elf multi in that case. That way you can give him 19 DEX and he'd be deadly with a bow. Shortbow only though with that class combo).

The Halfling I would leave as FTR/Thief multiclass.

Fact is, as long as you have your characters built well and you have the basics covered, you can go with pretty much any combination you like. My first run with the 3 character party was:

Human FTR dual classed to Druid at level 3
Human RGR dual classed to Cleric at level 3
Elf Thief/Mage

They rocked. Because there were only 3 of them, they levelled fast, and they got the pick of the best gear we could get (with only 3 to equip, the money built up fast as well, so I could afford to buy some good stuff earlier too).

Bard songs are powerful, at level 11 you learn a healing song so your priest can memorize other than healing spells and you don't have to search for a resting place for healing any more.
If you take two priests one should be cleric and one should be druid, their spells are different.
Thieves should be multiclassed and not be dualclassed, you need their skills all the time.

I do get druid spell as a have a ranger. I think he gets them around level 4.
I think Imoen from baldur's gate is proof you can dual class a thief and they are still good.

Hmmmmmmm. I do have a 6th slot open. Would you recommend a fighter/druid duelclass

I'd definitely replace one of the clerics, you don't need more than one. I'd make one of the priests dualclass and the other multiclass (you need healing at the beginning).
Both dualing the cleric and the druid (dual at level 3 or 7 and master scimitar and sling) has benefits, choose what you like.

Thanks to everybody who responded. You have given me a lot of useful tips. To the frozen tundras I go...