A t which stage do you calculate willpower vs threat? Before, or after you reveal cards from the encounter deck?

For example, if you commit 5 allies with 1 HP each, and a Necromancer's reach comes out of the encounter deck, dealing 1 damage to each committed character, thus wiping them all out, does their willpower still count in the quest for this round after cards stop being revealed?

You calculate immediately before placing progress tokens on the quest. So any changes that occur as a result of Staging -- or as a result of any Actions you choose to take after staging -- will effect the outcome. In your example with the Necromancer's Reach, you'll lose the willpower of the allies who are defeated.