Spoiler
He's returning because the strict order abandoned that world, but the world didn't want to just lay down and die, so the strict order slapped the band-aid know as tez on it to keep it alive. As long as tez is alive the world is too, even though that same world tries to kill him as an anomaly.
The demon him is named Reed and he's what tez becomes on loop 100 after falling into rage and despair upon learning the strict order abandoned the world already and left him to deal with the consequences of the strict orders choices. Reed can exist in the same timeline because when he falls to corruption he was able to spend a few decades in a sort of abyss that he wasn't sealed in to grow stronger in magic and demonic power instead of divine power. Once he was strong enough he could rip open the dimensions/timelines in order to find and kill himself before he awakens the rebirth ability initially, but like we see it the beginning of this season, it doesn't work.
The Fl Ally didn't reincarnate into the novel, she was transmigrated into it pretty much at random. Maybe it was because she bought the full package before she died that she got assigned the harder world, but thats not really ever brought up.
Any other questions? I haven't finished the novel, but I'm on like chapter 190, so i know a decent bit.
I still don't understand tho, even after reading the novel-update spoiler. Why is he keep returning? And why the flute the max level him (doesn't know what to call it), the one that become a "demon" or something, is exist in the same time as the current him? Why FL reincarnated inside that novel. Why?????? I keep reading even though I don't understand.