its an understandable confusion! there's some metatextual stuff with how he looks as well, but also an in universe logic to it.
his part 1 appearence is first off not actually literal! in actuality his "real" appearence is the same as his pt 2 one. it's just the way that he's depicted to the viewer is as The Weird Silhouette Esque thing he is. partly to seperate him from arvo (human), but also as a bit of a representation of his denial of his own nature. there's more symbolic stuff behind it i could ramble about but i think it'd get too long lol.
but then for the in universe logic behind it, the way that basilisk shapeshifting works in universe is by a combination of physical and psychological influence (this post has a more thorough explanation). in short basilisks cannot perfectly replicate the animal they shapeshift into, at least integuement/colour wise, so they make up for it through affecting psychological perception though "magic" ("anda" is what the magic is in this universe if you've seen me mention it before). so while arvo in actuality (in both pt 1 and 2) looks like a goofy bird guy the whole time, the people around him, as they never saw the transformation or know that it's even possible for a basilisk to shapeshift, simply just interpret him as arvo (human) visually!
as for his behaviour/personality somehow not managing to set off alarm bells... its a combination of these factors:
- the staunch disbelief in "magic" that the people around him have
- fragmentary memories arvo (basilisk) inherited from arvo (human), which is also a function of basilisk from aquisition
- the traumatic event which resulted in arvo's escape from the basement, which had the people around him believing that he had watched/heard his own father being killed by the escaped basilisk
karoliina especially convinces herself that what's "wrong" with "arvo" post-basilisk...ing, is that he experienced something greviously traumatic and is now driven by that angst, reaching for the only other "father" adjacent figure he has in his life (that being freddie), thus rejecting her and embracing a role in jägarlyan way more than he had previously. freddie too believes that arvo's simply been "changed" by his trauma, and asks less questions about it since this change has been benefitial for him. for them the more logical inciting incident of the sudden change is the Basilisk Traumatising Him one rather than discarding the current known science they're aware of and assuming shapeshifting is possible
(extra tidbit is that existing human knowledge about the different sophonts is often lacking/wrong assumptions. jägarlyan is completely unaware of a basilisk's shapeshifting capabilities, and i doubt they think any sophont can actually shapeshift or do "magic" at all. which is "supported" by having had arvo (basilisk) in the basement for such a long time and never seeing anything magical about him hehe. i dont think they've ever found/killed a basilisk in a human shift, either. but even if they did somehow see the true nature of and kill a basilisk in such a shift they'd probably conclude it's another species, like humans who have managed to see the true appearence of a shapeshifted basilisk historically have assumed)
