The C02 tank can be positioned either inside or outside of a refrigerator. The most common reason for locating a tank outside of the refrigerator is to allow more space inside for product tanks. To do this you will need to drill a small hole through the side fridge wall or the back to allow a gas line to come into the fridge. You need to exercise caution when doing this so as not to hit any coolant lines etc.
The distance between the c02 cylinder and the beer tank does not matter, it can be any length. A 5/16" line is used for the connection.
For aesthetic preference, the C02 cylinder can be stored inside the fridge so you do not have an unsightly cylinder in view.
In all cases the C02 cylinder must be upright and secure from falling over. If the cylinder is outside the fridge It should always be positioned away from any heat source.
Depending on how many beer tanks you have, you may need to fit a manifold inside the fridge to split the gas lines to various tanks.