For example, Say a Custom NPC has a Lore/flavor text: "Was once a human who inhabited a devoured WORLD and reincarnated into an Evil Being created in the eyes of the Supreme Beings whom I give grace for my soul's salvation and utmost loyalty."
I'd say yes, if we look at the Nazarick NPCs their behaviours and goals are detailed by their flavor text, but their memories are all of the events from their creation by the supreme beings. So if you put memories in their flavor texts there is a chance that they will believe that was their origin but they would have no memories of those events. Their existences started when the supreme beings made them. Aura and Shaltear argue about age differences and mention growing age and things like that, so if the years in Yggdrassil work like Elder Tale, then in game their ages refer to the amount of in game time that passed between their creation and the day
No, I don't think so. I'm hesitant to agree on this. In one hand we do have something very similar, what with the NPCs coming to life and everything, but we have no real evidence of it effecting anything outside their personalities and behavior. The closest example of physical changes come perhaps in Shalltear's and Demiurge's body changes. Shalltear can produce saliva and breath, despite being undead. and Demiurge developed a toned body, where in Yggdrasil you couldn't customize there. While these physical changes can be used to infer that their forms are changing to better suit their settings, they could just as well be something that was preexisting and Ainz didn't know about it. Vampires for the most part have intact bodies unlike Skeleton's and Zombies, so it makes sense that they can still mimic organic human behavior(Do Vampires need to drink blood? I don't think we have ever seen one express a need for blood. The vampire brides did turn a guy, but that was under orders. If so than it would make sense for both Shalltear, the vampire brides, and Landfall to have access to sustenance providing items, but it is never mentioned any of them having one. Tangent for latter). Characters with high strength like Demiurge might all be tonned, or he could have developed that in his free time.