Hillary losing the general election in 2016 would be most likely. Then Biden, after either losing to Hillary in the primaries—or sitting out because he knows she’s heavily favored—decides to take one more shot at the top job. The Republican president 2017-2021 doesn’t seem relevant. I would have basically come of with the rl scenario.
In your mind
1. Wouldn’t Biden reputation be ruined? A sitting vice president losing the primary, how did he bounce back in 2020? Unless he had better general election polling than Hillary and lost a close primary. Which he spends four years saying “I should have been the nominee”. Which I guess is what happened?
2. If Biden did not run in 2016, why did he run in 2020 in your scenario?
Perhaps losing a primary would be a big embarrassing, but losing to a big name such as Hillary Clinton could be understandable, especially if it’s close.
The RL situation actually makes sense. Everyone assumed Hillary would be the 2016 candidate, and that she would win. Since she lost, Biden was able to make the argument that maybe he’d have been a stronger candidate. Perhaps Biden decided to sit out 2016 because of the perceived inevitability of Clinton, and when she lost, Biden felt he had one more chance to achieve his great ambition.