Yes, it spreads up to 4 stacks of soulblaze to nearby enemies. It only does that though, it cannot give soulblaze to enemies with 4 stacks already. The Feat description says that the stack cap is based on how many stacks the enemy killed has, so you’d think that killling 4 tightly grouped enemies with purgatus would max out soulblaze on nearby enemies. No, it doesn’t go beyond 4.
The purgatus staff does apply soul blaze.
The DoT from the purgatus staff counts as the same soul blaze effect (and therefore stacks with) any other source that applies soulblaze (Blazing Spirit blessing for Staffs and Force Swords as well as the feats Wrack and Ruin, Wildfire, and Ascendant Blaze).
But yes, the Wildfire feat is pretty trash atm.
4 stacks of SB do not kill anything on damnation.
If the feat behaved as it is described ingame, it might be pretty alright though.