The observation by the Swift X-ray Telescope of the Fe Kα1, α2 doublet during a large flare on the RS CVn binary system II Peg represents one of only two firm detections to date of photospheric Fe Kα from a star other than our Sun. We present models of the Fe Kα equivalent widths reported in the literature for the II Peg observations and show that they are most probably due to fluorescence following inner shell photoionization of quasi-neutral Fe by the flare X-rays. Our models constrain the maximum height of flare the to 0.15R* assuming solar abundances for the photospheric material, and 0.1R* and 0.06R* assuming depleted photospheric abundances ([M/H] = -0.2 and -0.4, respectively). Accounting for an extended loop geometry has the effect of increasing the estimated flare heights by a factor of ~3. These predictions are consistent with those derived using results of flaring-loop models, which are also used to estimate the flaring loop properties and energetics. From loop models we estimate a flare loop height of 0.13R*, plasma density of ~4 × 1012 cm-3, and emitting volume of ~6 × 1030 cm3. Our estimates for the flare dimensions and density allow us to estimate the conductive energy losses to Econd <= 2 × 1036 erg, consistent with upper limits previously obtained in the literature. Finally, we estimate the average energy output of this large flare to be ~1033 erg s-1, or 1/10th of the stellar bolometric luminosity.