FAILING TO HOLD SHORT OF AN ACTIVE RWY; ACFT X PLT PENETRATES RWY AS A BE36 LIFTS OFF AND VEERS TO AVOID A COLLISION.

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INSTRUCTED FO TO CALL FOR TAXI. WAS TOLD TO TAXI TO RWY 23; HOLD SHORT OF RWY 32. FO READ BACK CLRNC. DURING TAXI CHKLIST WHILE ON TXWY 'A' NOTICED SPLIT FLAP INDICATION. INSTRUCTED FO TO CONTINUE TO CYCLE FLAPS; WE BOTH WERE LOOKING AT INSTRUMENT ON LOWER RH PANEL. GLANCED UP TO TURN AIRPLANE AT BEND IN TXWY. KEYED MICROPHONE TO ASK TWR TO INSPECT FLAPS AND NOTICED BONANZA PASSING TO THE L FROM FO CLR VIEW PANEL. TOLD ATC 'THAT WAS CLOSE; I DID NOT HOLD SHORT.' THE NOSE OF THE ACFT WAS JUST OVER EDGE OF RWY AND I HAD STOPPED THE ACFT THERE MOMENTARILY AFTER REALIZING I WAS ON RWY 32. WATCHED BONANZA OUT L WINDOW -- SAW IT LEVEL APPROX 30 FT AGL STRADDLING RWY EDGE LIGHTS WITH GEAR AND FLAPS DOWN AND EVENTUALLY CLIMBING. ASKED TWR TO INSPECT FLAPS AND COMPLIMENTED OTHER PLT FOR TAKING GOOD ACTION SO WE DID NOT HIT THEM. TWR ASKED IF BONANZA WAS OK -- THEY SAID YES ONLY BECAUSE THEY HAD FLYING SPEED. RETURNED TO RAMP TO CONFIRM FLAPS OK -- INDICATED OK. FIXATION ON FLAP GAUGE LED TO SITUATIONAL AWARENESS LOSS. SOP WAS NOT FOLLOWED; WE USUALLY SAY 'CLR L; CLR R' CROSSING RWYS. NEED TO PRACTICE BETTER CRM -- EYES OUT OF COCKPIT ON GND. CALLBACK CONVERSATION WITH RPTR REVEALED THE FOLLOWING INFO: RPTR STATED IT WAS VERY HOT AND HE WAS NOT IN A VERY GOOD FRAME OF MIND WHEN THE INCIDENT OCCURRED. HE IS THE CHECK AIRMAN FOR THE COMPANY AND HAD JUST STARTED A TRAINING SESSION WITH A CAPT THAT NEEDED TO BE CHECKED OUT BY THE END OF THE WEEK. HE WAS INSTRUCTED TO CANCEL THE TRAINING AND FLY A LAST MINUTE CHARTER. HE SAID WHILE TAXIING OUT FOR TKOF AND JUST PRIOR TO CROSSING THE RWY. HE BRIEFLY GLANCED TO THE L FOR TFC AND CONTINUED TO TAXI. THE TXWY WAS ANGLED SO HE COULD NOT SEE THE OTHER END OF THE RWY. THE FO WAS HEAD DOWN RECYCLING THE FLAPS TRYING TO FIX A SPLIT FLAP PROB AND WAS UNAWARE THEY WERE CROSSING THE RWY. THE CAPT SAID HE STOPPED WHEN HE SAW THE SMALL ACFT GO BY.