OK, first of all, let's recognize that there is a difference between templates (ie Flamer template) and blast markers. And that within blast markers, there is a difference between those that scatter (Ordnance and/or Barrage) and those that don't scatter.
Templates, quick and easy. Page 26, Remove Casualties within LOS and range of the attackers weaponry. So only models that the flamer can actually reach may be removed. Page 31, Template Weapons repeats this, "must come from within range of the firere." OK?
Blast markers, non-scatter. Again, reference page 26, range and LOS. So the shooter places the blast marker with the center dot on a model in the unit being shot, uses that location to determine how many are hit, rolls to wound, armor saves taken as applicable. Now the defender gets to remove anyone he wants, within range and LOS.
Blast markers, scatter. Now we finally get to the ones that can (per page 31) "land beyond the weapon's range, out of sight", etc..... And we also would reference the Main Rulebook FAQ that says that Ordnance can hit and kill models out of range and LOS. So for blast markers that scatter, take the casualties from anywhere in the unit.