by PandaEskimo
As others have said, the French FAQ clearly states that neighbors means left and right. They also state that if the player to the right or left dies, then the next player past them becomes the neighbor so that you always have one player to the left and one to the right unless there are only 2 players left.This ruling helps the king much more than the player outside. In a 4 player game, the king deals 2 extra damage to players outside Tokyo, while players outside have a 2/3 chance to deal 1 extra damage.
In the other ruling (neighbors are others inside Tokyo with you or outside with you), it's much more powerful for those outside. In the same 4 player game, they would deal an extra 3 damage while a king would deal no extra damage.
The card naming and theme makes me think the incorrect ruling would be more fun. As others have said, any time your monster attacks, his fire breath scorches monsters near by. When you are the king, the other king is the close by monster. When you are outside Tokyo, the other monsters outside are near to you.