So this is actually a fairly straight-forward timing question, and hopefully the answer will illustrate the same thing for many other such scenarios
Anything that says "Any Phase" or "Marshalling' (A bolded phase) is a player action, which is different from a response, a save/cancel response, a passive, a constant effect, a lasting effect…
The timing in question here is that each player alternates player actions, but each player action is resolved entirely (including all passives/responses that are initiated or triggered by that player action and subsequent passives/responses) before the next player action can be taken.
In this case, he plays Flame Kissed on Cressen, Cressen isn't saved, Cressen dies (becomes Moribund: Dead pile), passive effects triggered by Cressen dying are initiated, you can respond to Cressen dying (eg Retreat), and finally the action window closes and Cressen hits the dead pile.
Then you have an opportunity for a player action, but clearly it's too late for poor Cressen to discard Flame Kissed.
Just like in the books, The Red God 1, Cressen 0.
Now if your opponent is trying to kill a Str 3 character, suddenly things change a bit.
He plays Flame Kissed on Str3 character (action, passives, responses, action window closes)
He wants to play "Forever burning" to finish off the character, but you remind him it's *your* player action now… and you kneel Cressen, banishing Flame Kissed to the discard pile (passives, responses, action window closes).
He should have played forever burning first!