Was Playing a friendly game last night, ran into this issue, rebel player has 4 squads on the stations (superior positions was the objective), I flew my Raider up and got within 1 of all the squads in an attempt to lock them down with instigator. Now we Looked and couldn't find the ruling on if we played this correctly that the Raider locks them all down as the card states "squadrons are TREATED as being engaged." So that's what we went with. Was this correct?

Exact placement.

Yes. They are locked down, because Instigator doesn't care about generating Line of Sight to cause Engagements like Regular Squadrons do.

You just need to be within Distance 1.

In this case, the Squadrons are going ot be unable to move.

They are able to shoot... But any squadron on the Station is going to be obstructed shooting and thus, probably not have any shot, since there's no enemy squadrons about.