Pep has gone on record as saying that he is the most intelligent player he's ever worked with. He's coming back after one season — not two, three or four — and will clearly understand that he will not be in the starting line-up every game, far from it. He is 33. A player of his intelligence can play several roles, and personally I believe he'll play deeper than he did before. I doubt he'll stand in the way of McAtee, given that McAtee plays further forward, and that Pep has openly expressed his admiration for him several times this summer. In any case, when you play for Pep Guardiola, you've got to be prepared to play in a position that you hadn't initially bargained for.
The strength of any club is to recruit flexibly, but also to bring players through from the academy, when they're of the required level. It lies in recruiting players for the long haul, but also, more rarely, short-haul players (one or two years) when there is a genuine opening for them.