Upon running wp_insert_user() WP Keeps Saying user_login is already in the system when it isn’t

Direct modification of WP database is a very bad idea. In your case, you have problem because you avoid caching. WordPress caches almost everything what is able to cache, and user data are not the exclusion. When you call username_exists(), it returns information from the cache, not from the database.

You should use wp_update_user() to update user data. It sends emails to users, however, on changing password and email. You can suppress this behaviour by filters send_password_change_email and send_email_change_email (just rturn false from your callback function).

The worse way is to flush user caches after modification of database fields. You can do it by calling clean_user_cache( $user ).