Basically, when teleporting to the overworld from a vanilla custom dimension, the game freezes on chunk loading. The only way to get back to the world that I try to teleport to is to exit the world and re-enter (as in save and quit and then reload the world).

I've submitted a video to showcase the bug at https://youtu.be/feajI4hDwrY. Sorry about the length. I didn't realize the recording went on for 23 minutes. If needed, I can make a shorter video.

It seems super laggy on your computer. This kind of lag is bug

After profiling, the main lag cause after portal generation is light updates. You can try to install phosphor https://www.curseforge.com/minecraft/mc-mods/phosphor?__cf_chl_jschl_tk__=a84121efe39e375da66737c15874c826f859b4e4-1593147165-0-AUd7ZWwlbrE_DxYXzW3iQUGF8jGilgqqtS9PCfhskdGKv76-G7rQTPBsYmp00_OESeW29vIXvMfviRfEwzDmxk13PjTAnEe-H_PP7e65OA9FszNHO_DPUQJ0B0ve4beC5lzS-igaNTPg_qx-vUoCjrollo1iv482jpSXtwO6rbp7C_XuaeaaqH6ZMKU6UGOxWcZ61LOIiIJs1qeZBZeaicuByr13ZFAwscMug_tNq_xeXO9HL7L84VrjyQuubdH1hjWksKMs7RwxdS8DUVCZSf6zRQ9M5cZU7tWJS8Gn-1O5aEaPWk5qft2t4t_LCWTF-L3XHTsA4o_f5XF6FSq2Q6eNwaRJosTXtwu3sOHblztjnYNLxXCFel43fjjnB5SZTQ
And see whether it reduces lag

Did you disable "actively load remote chunks"? I found that disabling it will cause many issues

I seem to be able to reproduce this issue

The chunk loading issue is fixed. I cannot reproduce the nether portal vanish issue.

This bug appears to have been fixed in the latest release on Curseforge.

Edit: Thanks for fixing this! :)