Teacher: Stop. Stop the music, please. Excuse me for a second. Can I have everyone's attention please? Um, thank you. The National Weather Service has just issued a tornado warning. Apparently three funnels have been spotted heading toward Smallville.

Teacher: Now, uh, please, everyone stay calm. The twisters are going to
set down (disappear?) south of here (town?) , but for your own safety, no one will be allowed to leave the gym.

Clark: The bus station's south of town. (south of downtown?) Lana's there.
They are going to land/alight/make contact with the ground south of where they are now, presumably in town. "South of town" simply means to the south of the town. Apparently where the tornados are going to land, south of there they are, is also near where Lana is supposed to be.
Thanks, Barbara!