Anyone know if/how starling distancefieldstyle can use this style of output?
Yes, that's possible! When using msdf-bmfont-xml, you'll end up with one PNG texture and several FNT files. Enqueue all of them via the AssetManager, and you're good to go.
I noticed DistanceFieldStyle does have "setupOutline()" and "setupGlow()" etc. but I was hoping to style my fonts on the atlas image directly?
The advantage of Distance field fonts is exactly that you can add those effects at runtime, without any noteworthy strain on the CPU. And you can use the fonts in all sizes, which is a big plus.
However, those effects are of course a little limited. If you want to bake in drop shadow, outline, etc., you are going to have to use a standard bitmap font (no distance field). Then you're going to lose the scaling advantage, though (you'll need one font per size). Glyph Designer is one tool that's good at adding such effects, bmGlyph and Littera are others.
Furthermore, I think msdf-bmfont-xml allows you to add those effects manually via (say) PhotoShop, but I haven't tried that myself. (I could imagine it's tricky to make all glyphs staying within their boundaries.)
Does that answer your question?