Dion's first ability will still give it flying during your turn even if Dion somehow isn't a Knight.

If the target permanent is an illegal target when Bahamut's third chapter ability tries to resolve, it won't resolve and none of its effects will happen. You won't exile Bahamut and return it to the battlefield front face up. Instead, when the ability leaves the stack without resolving and state-based actions are checked, Bahamut will be sacrificed due to having a number of lore counters greater than or equal to its final chapter number.

A nonmodal double-faced card enters with its front face up by default, unless a spell or ability instructs you to put it onto the battlefield transformed or allows you to cast it transformed, in which case it enters with its back face up.

A token that is created as a copy of a double-faced permanent or a double-faced card in another zone is a double-faced token. It will have both the front face and back face of whatever object it's copying. If it's copying a double-faced permanent whose back face is up, the token will enter with its back face up. It can transform if instructed to do so.

Each face of a nonmodal double-faced card has its own set of characteristics: name, types, subtypes, abilities, and so on. While a nonmodal double-faced permanent is on the battlefield, consider only the characteristics of the face that's currently up. The other set of characteristics is ignored.

Each nonmodal double-faced card in this release is cast face up. In every zone other than the battlefield, consider only the characteristics of its front face. If it is on the battlefield, consider only the characteristics of the face that's up; the other face's characteristics are ignored.

If you are instructed to put a card that isn't a double-faced card onto the battlefield transformed, it will not enter at all. In that case, it stays in the zone it was previously in. For example, if a single-faced card is a copy of Crystal Fragments, it will be exiled during the resolution of its second ability and remain in exile.

In the Commander variant, a double-faced card's color identity is determined by the mana costs and mana symbols in the rules text of both faces combined. If either face has a color indicator or basic land type, those are also considered. For example, Cecil, Dark Knight's color identity is black and white, since its front face is black and its back face has a white color indicator.

The back face of a nonmodal double-faced card usually has a color indicator that defines its color.

The mana value of a nonmodal double-faced card is the mana value of its front face, no matter which face is up.