Let's say there is a monster with the ability "Kill the Baker". If the baker is not one of the five revealed town cards, but is in the deck or discard pile for the town, will this monster hunt? Or, will the baker simply be located and and killed (i.e., taken out of the deck/discard and put at the bottom of the traveller deck)?
I've always played the former, but after rereading the rules today, I wondered if I had been playing it wrong.
You've been playing correctly. Their kill-by-name is more of a preference than a mission statement.