Regarding the "was sitting" version of your sentence, Strunk & White's The Elements of Style has this to say:
participial phrase A present or past participle with accompanying modifiers, objects, or complements. The buzzards, circling with sinister determination, squawked loudly.
participle A verbal that functions as an adjective. Present participles end in -ing (brimming); past participles typically end in -d or -ed (injured) or -en (broken) but may appear in other forms (brought, been, gone).
"He was sitting on the bench" indicates the state that the subject was in during a specific time period. On the other hand, in the sentence "He sat on the bench" the verb "sat" is in the simple past, which indicates an event that happened in the past with no reference to its duration or continuation.
So your example ("He was sitting on a bench WHEN the tree fell") is appropriate because the participial phrase "was sitting" indicates his state of being when and immediately before the tree fell.
Conversely, "He sat on a bench when the tree fell" would mean that he sat down at the same time the tree fell (or as a direct result of the tree falling), which is a different sentence entirely.