You are exactly correct, however you have discounted the fact that vapour travels, and the PG vapour is heavier than air as are the vapours of many organic chemicals.
Therefore, the vapour rises over PG to form a 'cap' which eventually flows over the vessel in which you are heating it, and it eventually overflows and drifts down to the heating element or flame. Then you have a fire. This fire can be mild or explosive depending on the ratio of air to vapour.
So, we have a textbook example, but I've stood in the middle of such a fire and fought it.
I was the first to tell you of flash point. Now you are trying to teach me? I've been there and experienced this type of fire! So your talking book learning against actual experience.
Besides which, consider the fact that flash point is exceeded by ALL open flames in the room in which the vapours exist. If a flammable vapour contacts a flame, you get a fire.
I think you can understand this!