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*Spoilers ahead for the kiddies*
The whole game essentially takes place in an area controlled by Yado, kind of like a Hunger Games sort of scenario. Olathe was designed to test Joy and see how a society would react to it. The "White Flash" that the game refers to was Yado basically removing the women from Olathe and putting them somewhere else, most likely to test the effects of Joy on them as well.
Buzzo was also a partner with Yado in the process of making Joy, hence him having knowledge of the other women.
I don't think Olathe was specifically designed to test Joy. Instead, Yado found it to be an ideal location to do so. This is implied at the start of the game, where Brad has just been beaten up by Columbo and he's walking home. Further on from Brad's house, Yado is there and says something like "Olathe... It's perfect.".
Like you said, we can only assume that the White Flash was the process of removing all women. Like a bomb gives off a loud noise, or a fire generates smoke, the White Flash was just a secondary effect in whatever Yado was using to get rid of all females.
Also, anyone else notice that when you defeat really powerfull Joy mutants (Harry, Arty) the screen flashes white for a brief moment? wonder what that could mean.