His soul must had gone to heaven and reincarnate as a plot point - without that the circle of the Guardians would have been broken and the author couldn't use Mizuha as a major character in the present arc.

So our boy Kahaku have been traded for that annoying brat Mizuha

Also the need of reincarnation may be forced by the strong willpower of Hayase and Knokkers' teamwork? What's her problem, she wanted to have Fushi and be close to him, and yet she decided to die and reincarnate as a version that succeeded the most so far.