The extra engine braking (and extra charging) in B mode comes from increasing the strength of the electromagnets in the charging system. The engine braking effect is caused by drag from magnetic force.The car is being slowed by powerful magnets!
Almost right, but the effect is due to putting a load on the motor, acting as a generator, converging mechanical energy into electrical energy via the effect of moving magnetic fields. Energy transfer.
It's just running the main motor with the power flow reversed, so will cause no more mechanical wear than when running the motor forwards. The other motor is directly connected to the ICE and is mostly run in this generator mode (after starting the engine).
There will be some losses to heat due to inefficiencies, of course. When the energy can't be dumped into the battery any more, conventional engine braking is used.
Something similar happens when you press the brake pedal, until the amount of braking force needed requires the use of the real brakes (or something like ABS is needed).