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Had this come up yesterday a couple of times: I fired a couple of Battle Cannon rounds into a squad of 50 Guardsmen, and a combination of placement and scatter resulted in the shots hitting the very rear models, yet he insisted on removing the ones closest to the tank, stating it's only Barrage that removes casualties from under the marker. Part of me agrees with him, but another part is suspicious, particularly as by removing the closest models, his Sergeants stayed alive even though they were caught by the blast, and removing the models at the front took him out of rapid fire range.

Anyone know the answer?

Yes. Direct fire blasts still observe the 'remove closest' rule. You only use center of blast to determine casualty removal when the blast is barrage.

Your friend is right, only barrage works different and in that case you have to remove models nearest to the hole of the blast marker.

Blasts and templates work exactly like any other weapon, you remove the models that are nearest to the shooter, not those ones under the templates/blasts.

Those markers only serve one purpose, which is to determine the number of suffered wounds in one or more units that are hit, not what specific models are hit.

Characters can LOS in both cases.