Is it possible to die out of a combat?
I spoke to someone in Games Workshop today, this is what they told me.

Firstly it's important to remember that you can't die out of combat. The first model to remove would be the outer one.

If you do get into the situation above (for example if there are characters involved). There are a few ways to resolve. You can remove the flanking unit from combat by moving them back an edge or you can slide one of the units in so that the combat can continue. Locking the flank unit in the combat but unable to strike could be argued but it's not really in the spirit of the game.

There's nothing official in the book so it's a matter of agreeing with your opponent which scenario is fairest. If in doubt roll for it!