Peace mode is a very nice little mode but easily abused at the moment by higher level players as they run away to just completely stop an engagement so I have a few suggestions, hopefully they would be possible to implement without much issue. all suggestions are separate ideas and could all be implemented if possible but each stand on their own.
Mod Suggestion 1
Peace Mode can only be activated in a safe zone area, currently if you run enough, you can leave combat engage and just turn it on to avoid a fight as stated above, this would stop such issues mostly from what we have deduced since it would force them to either fight, suicide to a mob or run fast and far enough to hit a safezone without being in a combat lock.
Mod Suggestion 2
Only those below 30 can activate peace mode, this allows the lower levels to have an opportunity to level while forcing the ones above 30 to either make friends or fight for their exp.
Drawback Alternative to Mod 2
Activation after level 30 is possible but reduces your reputation by some variable dependent on level or just a flat deduction of about 100 REP