I'm not sure if there is a hard-and-fast rule for "flee in panic," or if I'm just overlooking it (albeit, I looked quite extensively), but what does it mean exactly, "when creature x flees in panic." My best guess, so far, is reading the cleric's turn undead and cause fear, then trying to figure it out from there. But I'm still perplexed.
When exactly does the fleeing in panic happen? Is it instantaneous?
What if creature x is engaged? Can creature x just run away, no defensive movement or anything like that?
In my games, I take it to mean that the creature so affected will move (flee) as soon as it is able to (i.e., on it's initiative turn) and is unable to withdraw. It is so frightened/panicked that it's number one concern is to get as far away from whatever it was that frightened it and so just runs (at best speed) directly away from said source. If that means something gets a free swipe at it (and possible backstab attempt if applicable) then them's the breaks.
IANAA, but I would treat this as if the target had failed a morale roll with a result of 2-. The target would declare a full retreat as per defensive movement at the top of the next combat round, upon which they would lose their attacks and run away as soon as they were able, with all the penalties that full retreat entails.