The target must be killed in order to be replaced by a flame template ("If target model is killed, replace it with one 50mm marker."). So the replace doesn't happen if the model is not killed.
Further, as Subötai quoted from the FAQ, the timing of Slow to Die isn't exactly as shown in the book. "If a model with Slow to Die suffers an effect that would kill it (eg. Headshot) or has its Wounds reduced to 0, its death is postponed and it may immediately perform a (1) Action." Note that "it's death is postponed". If it gets killed, then before it is killed it performs a (1) action. If it heals, it is not killed an no effects that result from it being killed would happen (ie he would not be replaced by the marker).