Suppose your 2x1 unit flanks a 2x2 unit. You wipe out 8 minis and completely remove the back rank. Now you close in 1. You are now engaged with the back of the previously 2x2 unit that is now a 2x1 unit. But you are engaged from your side and touching their rear. Are you still considered to be flanking them? Is your threat now 1 instead of 2 because the contacted edge of your unit is only 1?

There's no flanking going on if both units have contacted edges other than the front edge. Regardless of flanking, threat is based on the number of trays along the contacted edge so your threat would be 1 in the example that you gave.

RRG, pg. 12:
'41.2 If two units are engaged, but neither unit’s front edge is a contacted edge in that engagement, neither unit is flanking the other.'

RRG, pg. 19:
'82.1 When performing a melee attack, a unit’s threat is equal to the number of trays that comprise the contacted edge.'

Why is your unit rotating when it closes in?

39 minutes ago, drkpnthr said:

Why is your unit rotating when it closes in?

It's not rotating.

The combat starts like this:
00
X00
X

After the damage is dealt you are left with this:
00
X
X

And you close in like this:

00
X
X

Ahh I understand now.

You could always just shift to the side instead of shifting forward.