No, I mean flush with the fender. The stock wheels were made to set inside the fender. A 4.5" BS and 8" wide wheel will will protrude further out than stock. IMO the size you're looking at, and that I have, work perfectly on our trucks. Stick out just enough to look good, but not too far causing debris to sling up and damage paint. Take a look halfway down this page at Speedy's setup...this is what yours would look like (although your flares are different).
2" Lift on 3rd Gen?