Will depend on if it is a direct international flight from Chiang Mai as to whether you can use immigration at the airport. Everything can be done there including the forms and photos.
Examples:
You fly from Chiang Mai to Bangkok
You fly from Bangkok to another country
You must get your re-entry permit at the Bangkok airport
or
You are flying from Chiang Mai direct to another country
You can get your re-entry permit from the Chiang Mai airport
They will only extend to the expiration date of the passport. So if applying for a 1 year extension and the passport expires in less than 1 year when you apply they will only stamp you to that expiration date. Personal experience. 😉
The US does require it to be mailed in as per the Embassy website and personal experience. Quite a few steps involved, I did a full write up of each step in a Chiang Mai group.
As James mentioned, India now gets 60 day visa exempt entry. Sounds like your colleagues have old info or tried entering before the new rule came into effect.