Make it weapon 1 or 2, and anyone in the vicinity with an athletics or endurance of 3 can almost always resist it, no contest. Not, IMO, appropriate.
Also, I'd say zone- anyone outside the zone either has a barrier in between them and the grenade, or enough distance to reduce it's effectiveness by default (of it being a new zone).
As for the meaning of "optional rule"... I'm also in the camp of "This means this rule can be applied instead of direct stress for weapon damage, as appropriate only."
It's inappropriate for an incendiary grenade to do special damage, so it can only do direct stress.
It's inappropriate for a flash-bang to do direct stress, so it does special- with <Dazed> as the aspect, and only overflow going to damage.
It's appropriate for a shotgun to do either, depending on the load (buckshot/slugs vs bean-bag rounds, for example), but the player MUST define which he's doing, and stick with it (I'd require, at minimum, a supplemental action to switch).
If a player wants to do direct damage with a flash-bang, he'd have to come up with a pretty good description of how that works for me to even consider it.