There's a whole world of difference playing for Man City and playing for Everton though.
He just might never have been a technically good enough footballer to operate in Pep's team. That's the same for at least 85% of all English footballers.
If his attitude was poor etc. then that's a different matter. If not it's whether his confidence has been broken to a point he can never get back to what he was for Leeds (& England), which would be more than enough to get into our team. That's the gamble.
Think at Leeds he was settled, the big guy in the changing room, local lad etc etc, gave him a bit of a swagger (not arrogance but just confidence in himself)
I think turning up at City, especially with his style of play (long raking balls, a sort of relaxed style) is the complete opposite of what Guardiola looks for, i think that chipped away at that person that was at Leeds and he went into his shell.
People react to things in different ways, and i don't think Phillips reacted well to that. Some players look to prove a point, Phillips seemed to stop trying, didn't look after himself, and that came with negative comments from Guardiola
No one really knows if you can get that back once you have lost it. I'd say more often than not its harder to climb out of that hole than it is to stay in it. But there are examples of players with similar story's/situations that have excelled.
I'd argue its probably more likely to fall flat on its face than succeed though. Its your model professionals/excellent trainers who tend to do well after falling out of favour somewhere (Gareth Barrys/ Phil Nevilles etc)