A quick couple of thoughts. Although French units had been in the area for some time, the fire in the Church may well have been set by other units withdrawing in that direction. These may have rounded up the locals, as seems to have been the practice in other places.
It seems an unlikely act to deliberately murder them all by starting a fire inside the room. It would make more sense to do this from the outside of a wooden building. This doesn't seem to have happened in other places where locals were found locked up although there do appear to be other cases of death by asphyxiation.
If they were locked in an unventilated room with a passage to the church where a large fire is burning, then smoke, carbon dioxide (heavier than air) or lack of oxygen could have led to their deaths. The French may not even have discovered the deaths till next day. The fire in the room may then have been set to destroy the bodies. This would also explain why the room seems to have been unlocked when found.
But I still can't understand the reference to bodies standing or the child in the bag.