Fire doesn't stick around very long. It would be interesting and tactical if some weapon types could create longer lasting fire (napalm and flame thrower varieties).
As it stands fire isn't much of any deterrent whatsoever, perhaps if flaming tiles behaved differently, by causing small amounts of harm as a unit runs through it instead of at the beginning of a turn? While I do admit to feeling some bravado as I charge a sectoid armed with a knife through the smoke and flames, it would feel even more brazen if there was some danger to such manuevers.

And fire behaviour, likely the trickier part to code up would be for fire to spread and persist at burning down structures. Combined with causing harm to units as they pass through it, it could create some very interesting methods of gameplay. Setting buildings on fire to essentially 'smoke out' opponents. Blocking pathways and alleys with flamables in effort to better guide and direct your opponent.
just some speculation.. discuss