Well, the DM is not a player and if any player does not like the DM's story, feel free to tell them to leave the game.

Anyway.

You really might want to just drop the ''Return of the Old Character''. It does sound and feel sort of like a good idea....but really it is not.

And you can ''say'' your doing it for lots of reasons...but your not. Like ask yourself, if you were the DM for a group of strangers, would you use the old character turned villain? Would you still have fun, just thinking to yourself, how cool it is to use the old character turned villain...if no one else in the whole world knew or cared? Does it mean anything to you that the players know who the old character turned villain is? Are you hopping for a big dramatic reveal monent when you say ''yup, it's him" and all the players get upset? And how did you pick this character for the villain? Did you think or know the characters might react badly?

And see, none of that has anything to do with the story. It is just what your doing or trying to do.

It might be best to hit the reset button here....or at least just get rid of the old character turned villain...and introduce a new one.