According to p. 50 under "Blasts", it says "All models whose bases are touched or overlapped by one or more Blast Markers are affected". The forth paragraph down, last sentence says, "deal 3 damage to the original target, and 2 damage to each other model within the blast.". That last part confirms what it says in paragraph 3, that all models touched by the blast marker are considered effected by a blast. It says no where in the rules that the initial damage isn't blast. Everything touching the marker is, just that the initial target takes the most damage.
Paragraph 4: "The Damage dealt by a blast from a damage flip is one step lower than the damage flipped for the initial blast". If the "initial blast" isn't the initial target, what is it?