None of these things mentioned refute the James hallucination theory. You're just saying...well this other scenario could happen. No argument there, but the mere existence of one theory doesn't negate another.
James was on screen for the exact amount of time Bella was during the flashback library sequence so that has no bearing on whether or not he was real. The key point is that Bella is the only one to verbally address James. Hilda takes no notice of him.
We are not told exactly why Hilda is displeased. She just appears suddenly, watches Bella talk, and then dismisses her from work. No explanation whatsoever about why this drastic action is required for simply having a conversation with a spouse. Even if Hilda doesn't like Bella, sending her home with no reason and no acknowledgment of James is odd. I say it is because Bella has been exhibiting signs of mental illness at work. That would be a proper reason to send someone home - When a person is sick, not when they are naughty or improperly using copy machine. Also notice that Hilda doesn't seem particularly angry. You might even say she is more concerned and frustrated than anything. She just says Isabella I think you should go home now. Again something people say at work when you appear unwell. Bella wasn't even disciplined, but just sent home.
If I were sitting outside library in the man's place, I would look up whether or not it was a "loud argument" or a mad woman ranting to herself. The man's look doesn't prove or disprove either one. The fact that he is the central focus of the render does draw my curiosity, however. This is a DPC habit.
DPC hasn't given us enough time alone with Bella to see if she has exhibited this sort of madness recently, but he does announce her troubled mind in neon lights during the crying library scene. And I don't think Bella's mental problems were ever successfully treated. It's clear that throughout the time we have known her, there has been something wrong. I'll bet even Jill doesn't know the true extent of Bella's mental state. My best idea is that during ep. 8 flashback, we were viewing Bella not long after the traumatic incident with James and his departure. Whether it was infidelity, getting sleep humped by Jill, loss of a child...a murder, Bella hasn't been able to properly process what happened. Essentially, a psychotic break has occurred in her mind due to trauma. I think the arrival of MC has pushed some of that to background but all it will take is one good DPC drama and Bella's psychosis will return in full. I hope he doesn't do that though...another Leah would be such a drag.
At first I wasn't even remotely on board with this theory, but now I think it would work well to tie in with the fact that Bella really does need help (as per the monologue in episode 3).
I can't help but keep that monologue in mind:
mc: "At the time I couldn't understand Bella."
mc: "The attraction was there, but for her it felt so wrong."
mc: "I remember feeling bad about kissing a married woman."
mc: "I figured she felt the same since she was being unfaithful to her husband..."
mc: "...which, of course, is a very big deal."
mc: "But if I had known the real reasons to her tears..."
mc: "...and to her persona..."
mc: "I wouldn't have kissed her that night."
mc: "I would have called out for help."
To me, that was one of the most poignant scenes in the game so far.
This is future mc talking to us, saying he wouldn't have kissed her if he knew what was going on.
He says at the time he figured it was just out of feeling unfaithful that she was upset, "but if I knew the real reasons...", that "real reasons" comment means eventually he found out being unfaithful wasn't really what it was all about. There's something deeper and more fucked up going on.
Maybe Jill doesn't even know the full extent of all this shit. It's Bella who is protective of Jill, but if Jill knew that there was some shit that was deeply troubling Bella, she might not be so quick to lean on her for help all the time and would be more inclined to help Bella.
Obviously we know James existed, we've seen Bella's wedding photo. It sounds like Bella hasn't been with James for about 3 years (based on Bella's comments when she was turned on by the mc the first time she stays the night), and it's hard to gauge how old she was in the ep8 epilogue, it could have been 10 years earlier, or 2 years.
The big problem with Bella is, if she's fucked up, she's no longer reliable, so we can't simply just accept everything she says and anything we see from her perspective.
It's definitely intriguing, and I hope the payoff is decent.