The achievement description is a little misleading. You can obtain this by simply running over 256 within a single life, they do not have to be set on fire.
Recommend going for this near the Stadium Zone. There is a large parking lot with a good number of pedestrians that spawn. Simply drive around the parking lot running over all pedestrians you see. You can control the cops chasing you easily here and have less interference. If your threat level starts to rise, there is a silver coin near the wall of the stadium you can driver over to lower down your threat level. If your vehicle armor stats to go down, quickly find a new vehicle and continue running over pedestrians.
See the video for "Dance, Player, Dance!" for the route to the stadium.