If my character has this feat and stands right in front of a flanked opponent (within a 5ft melee distance) does he still take the -4 for firing into melee or would my character still need precise shot to remove the -4 penalty?
If you are the only character in melee with the target, I wouldn't penalize you the -4 (I assume you can get out of your own way).
If other characters are in melee with the target, I probably would. However, being next to the target means you don't take cover penalties, so that should help.