I built the level 1 reinforced wall. It seems to slowly heal on its own when its set on fire by flamethrower turret or handheld flamethrower! Surely that cant be intended behaviour?

This is indeed the behavior, however, it takes (quite a bit) of electric power in order for the wall to heal, make sure to keep an eye out on your power network. The higher tier walls have different stats, for example the tier 2 wall (aka the green one) has more health, but heals slower. Even higher tier walls deal damage, but they consume considerable amounts more power to heal/build the wall.

Make sure you keep you walls powered, when they run out of power, the whole (section) of wall will crumble to pieces until your power network can sustain it again.

It does not seem to be working that way. It ONLY heals when on fire, doesn't heal otherwise even when provided with electricity.

Anyway, thank you for the clarification and your efforts! Really helped my Deathworld Marathon + Rampant game.