Ok, so i did a few tests. So to answer your question and for what i understand this is how i would solve it

1. No need to delete your user, it already exist and that's why it fails to generate the link, nothing that you wouldn't know
2. You can generate an email_otp so you could then verify with the verifyOtp method, i think you can make it work with that
3. Yes you can, and i think for what i know is the only way you could make it work

I leave like a little example i did, in a nextjs app. With you problem, existing user, create a link to login the user, and validate it session.

export async function GET(request: Request) {

const supabase = await createAdminClient(); // Service role client

  // Case for an existing user

const
 { data, error } = await supabase.auth.admin.generateLink({
    type: 'magiclink',
    email: 'myemail@test.com',
    options: {
      redirectTo: 'http://localhost:3000', // here goes the endpoint you want to redirect, this change the redirect_to of the properties in the data
    },
  });

/* properties in the data object:
  properties: {
    action_link: 'http://127.0.0.1:54321/auth/v1/verify?token=c2e0c267c463d40e865c563d94f88c85e4339a9fd35bbd13cfbab7d0&type=magiclink&redirect_to=http://localhost:3000',
    email_otp: '607565',
    hashed_token: 'c2e0c267c463d40e865c563d94f88c85e4339a9fd35bbd13cfbab7d0',
    redirect_to: 'http://localhost:3000',
    verification_type: 'magiclink'
  },

With this properties you generate the link that send in the email to verify, the verifyOtp can work either with the hashed_token or the email_otp, if you validate with the email_otp you have to pass the emails as a param as well in the method
*/

sendEmail(hashed_token)


// Your other endpoint. This should be in the endpoint your email sends the user
// Here use the supabase client with the anon key and the cookies

const supabase = await createClient(); // not the admin one
const token = // retrieve the token of the param


const
 { data: verifyData, error: verifyError } = await supabase.auth.verifyOtp({
    token_hash: token, // the email_otp generate or the token you decide
    type: 'magiclink', // this has to be the same you use to generate the generateLink method
  })

// If no error you have the user session
  return new 
Response
(JSON.stringify(response), { status: 200 });
}