my rule of thumb is that imagine there is another character between you and the person you are trying to do the fatality to. If that doesn't help, just play through once with the second player not moving, and see how far it is. It's not close, and it's not half way across the screen.

Later

I'd say about an arm's length away from the opponent, the farthest you need to stand away from the other player to land a low punch

Sweep distance is about the maximum distance you can perform a sweep (Back+LK) at. But if you want to measure the distance in steps, then it's about 1 step away from the opponent.

Mortal man pretty much has it. If you can hit them with a punch or kick you are too close.