So Frightened is dependent on being "engaged".
But it is imposed when failing Fear or Terror check and rolling 2 banes on first encountering a creature.
So what if you encounter creature at medium range, make and fail check,roll your 2 banes, but are not engaged?
If you only had to make check when engaging, it would read out sensibly (though this would make Fear/Terror ratings less dangerous).
A 2nd point, I like that horrific scenes etc. can have Fear and Terror checks. But since you don't "engage" them the Frightened condition really doesn't work.
Pending answers, I'm thinking Frightened should be more like: lingering condition (for encounter), the stress factor triggered by engaging creature or interacting with a scene (e.g., trying to determine what could have made injuries done to mutilated corpse). It would still be dependent in that if the source was eliminated (horrifically mutilated corpse covered over, monster slain) then the condition would end even if scene not over.
Rob