Originally Posted by Michael J Fox is Canadian
Not sure the relevance of that here lol but yes you are right, George claims he does not stand up to Biff in episode 3. And it does make sense as george and lorraine act more like they did in the first timeline. Lorraines drinking, she doesn't get along with George, he's a peeping tom (to a different extent though).
The real reason George and Lorraine reverted back to their TP versions is because Marty's original 1955 trip was erased from the timeline. This is explicitly stated by Marty in Episode 3.