That's right. I think of the location cards as labels rather than as terrain (as in a board game or war game) or as a map.
So, you can have the party walking in a street, on their way from the gates to the temple. If action / a fight breaks out, you can put the character stand ups down as a group in the centre of the table. We all know they're in the street, because we've been discussing their journey. So we put the 'street' card next to them to remind us all that that's where they are and what special rules apply while they're there.
We can put the city gates card down to one side and the temple card at the other. The distances don't matter: they're just reminders that if the players want to go there, then they can, and if they do, what rules special effects there will be.
I wouldn't use very many range markers. Perhaps a group of NPCs that they bump into in the street / a gang of thugs they're fighting with can all be placed next to the PCs, no range counters needed. They're all in close range, unless any of the players do anything odd, like run off as fast as they can. Okay, perhaps that's not odd...
And another NPC can be seen standing at the end of the street. I would just put the stand up somewhere convenient and some distance tokens to remind us all that he's 'at the end of the street'. I don't need to specify that he's '250 meters away'. 'At the end of the street' is descriptive and cinematic.
If the players ignore him, he'll stay there. If one of them runs towards him, then I might just move the PC stand up to the middle of the tokens, to show his approximate progress, but I'd describe it as "you charge up the street, dodging the merchants' stalls and refugees' carts. The NPC leader looks startled and..." (either runs away or stays where he is and summons a few more henchmen from the surrounding alleys to back him up!)