1. Yes, the taxable amount of such a conversion is subtracted from AGI when determining the MAGI for the purpose of a Roth IRA contribution.
2. Fidelity can't undo the distribution, but since this was a regular distribution that actually was not a distribution of any excess, the distribution is eligible for rollover within 60 days (since it would not be a violation of the one-rollover-per-12-months limitation).
Just make sure that they did a regular distribution and did not somehow do a return of any 2023 contribution you might have made (which would allow you to treat an excess as part of your 2023 Roth IRA contribution). A return of a portion of your 2023 Roth IRA contribution would not be permitted to be put back, although, with that amount of a 2023 contribution having been undone, you would still have room to contribute to a Roth IRA for 2023.
