From the Errata:
Erratum: Prime p.54 : Casting Spells
Replace the text of Casting Spells with the following:
Warcasters have the ability to cast spells. A warcaster may cast spells during his activation by spending a number of focus points equal to the spell’s focus cost. Resolve the spell’s effects immediately. Unless noted otherwise, spells that target a model other than where the spell originates require line of sight to their targets. Warcasters cannot target themselves with offensive spells. Any spell, including offensive spells, may be cast while the warcaster is in melee. Resolve the spell’s effects immediately. A warcaster may cast as many spells during his activation for which he can pay the focus cost. The same spell may be cast multiple times during the warcaster’s activation. A warcaster may cast spells before or after moving, but not in the middle of his movement. Likewise, he may cast spells before and after each attack, but he cannot interrupt an unresolved attack, nor can he cast spells between the movement and attack portions of a charge. Spells may be cast prior to initiating an attack or after completely resolving an attack, including determining hits, damage, and special effects. A warcaster cannot cast any spells if he runs during his activation. For example, a warcaster could cast a spell, move, use his combat action to make a melee attack, cast two more spells and then spend another focus point to make an additional melee attack.
Redded the relevant portion. It doesn't list any targeting restrictions here. In fact, I believe even Greylords can spell models not engaging them while engaged.