You have a good 3-4 months before you really even need to decide if you're reapplying through ERAS, so the decision between either looking for an open PGY-2 spot vs. reapplying is not looming. Don't prematurely come to a decision on your plan without really thinking about what you're trying to accomplish. I would spend the next few months thinking about what you want in an IM program and your future program, and then decide how best to achieve those goals.
By far, the easiest path forward is that you do well in your prelim, your prelim program likes you, a PGY-2 spot opens up there (or they open one for you), and boom, you proceed as if you were always a categorical resident. That's possible at some programs, while at other programs it's a no-go unless one of their categorical residents drops out for some reason. That's a question you need to ask your PD, and I think that's fair to bring up in the near future. Your PD obviously knows that you need to find something to do after your prelim, so knowing that you want to stay in IM will help him figure out how to help you. On your side, if you want to do general IM then staying at your program is also probably the easiest thing to do unless you have a strong need to geographically relocate ASAP. OTOH, if you're hoping for a fellowship then you need to evaluate whether or not you can do that at your prelim program.
Second easiest option is that you find an open PGY-2 position and are able to slide into that after your prelim. These positions are not widely publicized, so if either your PD tells you that they likely won't be able to open a slot for you OR if you decide that you can't achieve your career goals at your program, you'll still need your PD to help you find these positions. These sorts of positions do open up, but you generally only hear about them through word of mouth or cold-emails.
Finally, you can always reapply. There are countless threads about your funding question, but suffice to say the funding issue will be a problem for some programs and not a problem for others. You say now that you will "happily redo intern year"... I will gently suggest you may not feel the same way in about 12 months 🙂 But regardless, this would be my last choice by far unless you really can't find a PGY-2 position. Aside from how painful repeating intern year is, you're also going to struggle getting time off for interviews while on an intern schedule.