What happens when a Baddie flees?
The Baddie is removed from the Battle Mat and should be placed in the defeated Baddie stack. As well, the closest opposing unit with loot has to discard a loot. This does not trigger a Baddie with both Flee and Treasure to drop a Loot die - you have to defeat the Baddie yourself in order to get the loot die.
Why does the Flee skill say Round 5 if the Baddie runs away in Round 2?
This is there in case the Baddie enters the Battle Mat after Round 2. If it runs away in Round 2, it won't be around in Round 5 to run away again. But if it's been in the BQ and doesn't enter play until Round 3 or 4, it'll run away in Round 5.