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My players have done the "burn down the town to save it from the bad guys" thing. "What do you mean, the townsfolk aren't happy? We saved them from the low-level gang of extortionists!"
I had a group of adventurers that ended up making fierce enemies of a local street gang (as part of my effort to get them to actually leave the damn town and start the planned adventure, lol), and through almost no fault of their own, they actually succeeded in destroying the street gang in an incredibly public show of accidental epicness. In the process of which they also succeeded in setting fire to a large chunk of the neighborhood.
Faced with the decision of whether they should punish the party for destroying the neighborhood or reward them for freeing it of the gang's control, the local constabulary decided to induct the party into the city guard and make them responsible for patrolling the area.
I recently run the "Volkrad" set of adventures from Dungeon magazine - they begin with "A Hot Day in L'Trel", which is basically an urban fire scenario, and heavily influenced a part of the Shackled City adventure path.