Isn't it a major contradiction for Sai Baba to say 'I myself shall enter with 'I-ness' and write with my own hand' right after telling the author to dissolve his ego? It sounds like one ego is just being replaced by another.

The passage in Chapter 2 presents this not as a contradiction but as the result of complete surrender. Sai Baba's instruction is for the devotee to 'dissolve his ego and surrender it at my feet.' Only when this is done completely, so that 'no trace of it remains,' does Baba say, 'Then I myself shall enter with 'I-ness' and write with my own hand.' This implies that the divine consciousness, referred to as 'I-ness,' can only operate through a vessel that is completely free of personal ego. The author is described as 'merely a pretext,' emphasizing that the true author is the divine, not a new ego.