Retaliate Fireball does exactly that: Retaliate after being hit by a fireball. If a thing is dead, how can it retaliate? If a thing hasn't been hit by a fireball yet, how can it retaliate? It's not a priority thing at all.
I realize that from a code implementation viewpoint that it's distinct and implemented differently, but from a player's viewpoint you're arguing semantics. One of the fundamental rules of Desktop Dungeon is that when I attack a monster the monster will hits back, and the order of resolution depends on the relative priority of the player and monster. From my perspective, there is no conceptual difference between using a melee attack or using a fireball against a monster with fireball retaliation. As a result, I presume the default rule of priority in Desktop Dungeons: all else equal, the monster hits first. It wasn't until the Mystera 3 puzzle that I even considered
it might work any other way.
I also don't think the word "retaliate" is explicit. The player is always
the instigator of any attack engagement, so technically monsters are always
retaliating against your actions. The fact that fireball versus fireball retaliation works somewhat differently than the regular attack exchange isn't actually obvious to a player, and I don't think the word on its own is nearly explicit enough to convey this notion.
TL;DR: the fireball attack always resolves before anything else triggered as part of the exchange. Thus, it does make sense to talk about in the context of priority.