The sunken city is under the direct influence of Eric's mind due to the nature of it being the place where he died, making the link between the spirit world and the material world stronger. Since he was the one chosen to become the Creator, he has additional powers beyond the other spirits close to him that are called back. (his girlfriend, his mom and his dad) He tried to rebuild the city as best he could from whatever ruins were left.
The level represents his inner state, which is why you have a human door, a long narrow passage that goes deeper into a twisted cave. (Eric's self-expression/feelings made manifest)
I think Eric rebuilt the door as a compromise with the Creator. The Creator probably wanted to seal it off forever or destroy it, but Eric "argued" for rebuilding that door - secretly hoping that someone would eventually find him.
The second section is like reliving Eric's past; you're digging deeper into his subconscious to get to the truth of what he is. Its not until you get to his most vulnerable place (his relationship with his parents -> the mom&dad boss) and until you become a symbol of the disaster at the beginning of the game (you destroy his parents) that the Creator is able exploit Eric's weakness to find his location and reach in to capture Li as bait.
In terms of the Creator as a character, he's ashamed of his human part, but then his human part itself misses other humans and wants to just be a kid again. He's very conflicted in that sense. Part of the cycle of creation and destruction was that he would create something and then become ashamed of it, because it reminded him too much of himself (probably in the case of the Krotites) or because it wasn't enough like his ideal "perfect woman". (something like the Erulians or Druniads, who were pretty in a sense but not conscious on the level of a human being)
When he did manage to create the "perfect woman" (Mia; as in the only woman he could truly fall in love with) she was far too good for him; she had her own free will and desires and wanted to live her own life. She broke free and tried to raise Naija away from the Creator. However, he pursued her with his minions and forced her to keep running and trying to raise Naija in different areas of Aquaria. Eventually Mia discovered the Mithalan Priests and used their power to hide from the Creator and manipulate Naija into destroying the Creator. (Naija has different powers than Mia, which would be one of the points elaborated on in the sequel.)