I tend to use the following methods for fumbles.
Natural 1 (fumble)
Melee: Attacker provokes an attack of opportunity (following the normal AOO rules)
Ranged: Attacker rolls randomly against all available targets within range (excluding attacker) and makes a single attack roll to see if he hits that random target (surprisingly hits animal companions more often than not lol)
I have never been a fan of the drop weapon fumble since pathfinder has AOO rules. It also limits the number of fumble AOOs to the defender (1 unless they have combat reflexes).