It's meant to be metaphor Monster Mugo, Young Mugo Elder Mugo, and "Lee Muhan" are all the same soul that got split up during the Mugo ritual. In Buddhism Nirvana isn't an afterlife like in the Christian Bible it is being in a state of spiritual peace and freedom. "Lee Muhan" Represents Lee Muhan inability to move on from the past and the loss of his omega. While all 3 Mugos are trying to live in the present with Jaeheon "Lee Muhan" holds them back. So when "Lee Muhan" "dies" and heads to Nirvana while Jaeoheon burns everything it's represents Lee Muhan finally being able to let go of the trauma he suffered during the Mugo, let go of the grief losing of his past lover and to learn how to love again with his new lover Jaeheon

Sorry but I find it hard to believe that human mugo just left so soon after fighting so hard to see his omega again. Like that’s so unsatisfactory. I thought we’d at least see them smash and reconcile a bit more or he’d be added to the harem…