Generally, I only use flaming arrows in a bridge battle, when defending against ladders, or if I'm in a really close infantry slug. (I normally turn fire-at-will off the instant my melee troops engage the enemy. Friendly fire is the most wretched of casualties.)

And yeah, I agree with Mikeus Caesar that flaming onagers are so annoyingly inaccurate that they negate much of the advantage of the morale reduction when it actually hits. But nothing's more gratifying than torching the capital city of an enemy faction, if I'm feeling particularly vengeful. I still remember the time I set Tarentum ablaze when playing the Greek Cities, and then massacring the population after I won. Ah...... good times.