I've done search tips for combat in this forum and read manual, but still has question to ask you guys :)

Character equipped with range weapon will automatically using their bow/xbow.
So, how we know about attack distance for melee weapon ?
we have to stay very close to enemies or we can attack from afar.

What are difference between "RED" and "YELLOW" light in character portrait while engaging combat mode.

You need to get right in their face if you want to melee, I don't think there is much difference wether your characters are wielding spears or for instance daggers though. I believe the yellow box means that your characters are spotted by enemies (and that means certain spells or rest etc won't work) and the red box means that they are within melee hitting distance and enemies can therefore harm you.

I am assuming this is for Might and Magic VI, VII, and VIII.

Yellow means there are monsters "nearby." I don't know how far that is exactly, but outdoors you won't be able to rest. Indoors it's a little more flexible. And it doesn't matter if enemies can see you, only how far away they are. Red means very close, as in striking range, or possibly ring of fire range (if you have that spell).