Correct way to define board outline?
The middle of the pink line is the board edge you are defining.  The width of that line is a CAD/visual construct and means nothing to the fabrication process.  The keep-out applies only to electrical (i.e., metal) portions of the design.  You can typically take silk all the way to the edge of the board.  Based on the polygon you have just above the "RAW" PTH, you likely are as close as you can get to the edge of the board with this connector (looks like a pin header).  If you want to have the yellow (black plastic of pin header) directly to the edge of the board, you will have to decrease your keep-out.

The keep-out is for your own protection so that when they cut the PCBs from the panel, and apply mechanical stresses to the edges of the board, they aren't inadvertently breaking any of the metallization causing random opens/shorts.