Ahhh, I see what happened! (thanks for the pics!)

See the wrinkling above the return and the rips under it, and where it used to seal (the darker semicircle under the rips)? What happened is either that the r4eturn was originally cut in when the liner hadn't fully stretched into the floor/ cove, or the floor or cove washed out over the winter.

Leave your water level where it is and remove the return (just like Ben told you, keep track of the gaskets and their orientation! and replace any that look worn. This will let the wrinkles settle down to partially cover the hole in the wall for the return. Carefully trim any liner that blocks the hole. Then apply a patch to fully cover the return hole and the rips + 1". Allow patch to fully seal, then cut an "X" across the wall hole and reinsert the return. Trim the liner that pokes through the back of the wall and retighten the retaining nut. Reattach the hose and you're ready to refill the pool and fire up the system

p.s. - it looks like you have iron in the water.