Q: How does one determine how far out on the wing to place the engine, that is, what criteria determine the distance of the engine from the fuselage?
One would prefer to mount the engines as close to centerline as possible. This mitigates control problems in engine-out situations and keeps the wing structure as light as possible.
Wing-to-fuselage separation is dependent on a number of factors.
First is the yaw force factor. Too far out on the wing, and single-engine control becomes difficult. You only have so much rudder control, so the rudder surface and the amount of rudder control are one factor.
Second is the bow wave from the fuselage. We do not want turbulent airflow from the fuselage to enter the engine; we want as much clean, unobstructed air as possible entering the engine, whether in straight flight or in turns.
On low wing aircraft, with engines mounted below the wing and far away from the centerline, engines too far out on the wing would limit the bank angle during landings, making crosswind/gusty landings difficult.
And lastly, the engines cannot be placed too close to the wing root because we need space for the landing gear support structure. Too close to the cabin and engine noise will be increased.