I might be reaching but perhaps the twist that they are in Bad Place is not the only twist. Perhaps they are in some sort of rehabilitation place because Eleanor got better since she arrived. But I guess I'm thinking too much and it's all about the Bad Place.
Well, the Afterlife is certainly bigger than The Bad Place. Michael brags about having stolen Janet from The Good Place and that she is part of a much larger mainframe. Also, Michael and his boss were apparently not the ones who made the decision where Eleanor and Co. were going to end up.
That means that there is a boss over Michael and his boss, and assuming Michael's immediate boss isn't actually the Devil himself but Middle Management, there's a boss over the Big Boss. And if Eleanor can change for the Good in The Bad Place, then there's an excellent chance that the Ultimate Boss (i.e., God) has a process in place for those souls in The Bad Place who start to "get it" and become better people to escape--if not to The Good Place, at least to someplace better.
Yes, the chance of redemption certainly makes a more interesting story. I mean for them to remember who they are is interesting but I hope there's something more to it.
Maybe somebody above Michael thought Elenora, Chidi, and Tahani were redeemable, so they let him put them in a milder version of the bad place where they could improve themselves instead of just suffer. Eleanora and Tahani realized that they had been selfish; Chidi learned to be less judgemental.
The memory-wipe bothered me, because it meant they lost all the improvements they had made in their characters. But maybe the higher-up has arranged for them to RETAIN the improvements.