I do not know the background fully other then what I read in John about this.
If the language spoken was Aramaic then what happened is that the capture of the event was translated from Aramaic into Greek. In other words, the conversation happened in Aramaic but Nicodemus did not grasp it fully and was wondering what to do.
In any language, if someone says to you that you "have to be born xxxx" (where xxxx is the Aramaic word Jesus usd and for which in Greek there is word with two meanings, again or from above), is rather confusing.
The same with other expressions, like when you read we need to eat His flesh or drink His blood. Most Jews did not grasp the meaning and felt offended and left.
It does not mean the event did not happen. The confusion is often generated due to translations. Very often languages cannot be translated 1:1 into another language. Because a language originates and develops independently from other languages.
I therefore believe that the event happened and that the original Greek translator had to use a word in Greek that happen to have 2 meanings. Did he choose the right word? Did he really undrstand the original Aramaic word that Jesus and Nicodemus used? Those are problems for the translator not for the original players of the event, nor for the reliability of the event itself.
Technically, I could live with the following translation for this:
.... have to be born again, from above.
Both meanings of the Greek word fit here, because, if one needs to be born again, it can only be from above, as physically, it is simply not possible.
And I fully understand the confusion with Nicodemus because if someone would say this to me in Dutch, my mother tongue, where in this case there is not one word that means both again and from above, the use of either would still be very confusing:
...have to be born again is just as confusing as have to be born from above.