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The main problem I see is that you are taking too long to finish your story.
Most writers are unhappy with most of their older works because most writers develop. What you need to do is pick up the pace and finish your novel before you begin to feel different about what and how you want to write. Then write the next novel.
You might profit from participating in NaNoWriMo or some variation thereof: Write your novel in a limited time. That can be a month, as in NaNoWriMo, if you can take a month off of work, or a year if you cannot write more than an hour a day. But finish your book within one year at most, then put it away and write the next one.
No matter how much time you put into your first novel, it will not be a masterwork, and very likely will never get published, so get on with it and get to the next one. You can always come back to your first novel and rewrite it once you have acquired the necessary skills through the many books your have written in the meantime. Many writers have done that.
Other problems I see are:
1.
You may not understand the requirements of your story well enough to outline it in a way that allows you to follow that outline when you write. You describe how you begin to write and then realize that you need to write your story differently from how you thought it needed to be written.
The solution here is to read a lot (in the genre that you want to write). You need to acquire an instinctual understanding of how stories (in your genre) work to be able to plan, outline, and write (such a) story. You acquire that understanding by reading (that genre).
2.
It is more difficult to write a story from a worldbuilding project such as an RPG game. You will invariably feel the need to include all that worldbuilding into your story. But stories typically aren't descriptions of worlds. (Think of how all the worldbuilding that Tolkien did is not part of the Lord of the Rings.)
What you need to do is focus on the *story* that you want to take place in that world and **leave out as much of the backstory and worldbuilding as you can** without compromising understanding. We really don't have to read a lengthy prologue about how the father of your protagonist taught him how to hold a sword to appreciate that your hero is a good sword fighter.
~~* * *~~
As for your main question, you rewrite when edits aren't enough. As simple and as vague as that. If your story needs some adverbs deleted, edit. If your plot has taken a wrong turn, rewrite.
But that isn't your problem.

The main problem I see is that you are taking too long to finish your story.
Most writers are unhappy with most of their older works because most writers develop. What you need to do is pick up the pace and finish your novel before you begin to feel different about what and how you want to write. Then write the next novel.
You might profit from participating in NaNoWriMo or some variation thereof: Write your novel in a limited time. That can be a month, as in NaNoWriMo, if you can take a month off of work, or a year if you cannot write more than an hour a day. But finish your book within one year at most, then put it away and write the next one.
No matter how much time you put into your first novel, it will not be a masterwork, and very likely will never get published, so get on with it and get to the next one. You can always come back to your first novel and rewrite it once you have acquired the necessary skills through the many books your have written in the meantime. Many writers have done that.
Other problems I see are:
1. You may not understand the requirements of your story well enough to outline it in a way that allows you to follow that outline when you write. You describe how you begin to write and then realize that you need to write your story differently from how you thought it needed to be written.
The solution here is to read a lot (in the genre that you want to write). You need to acquire an instinctual understanding of how stories (in your genre) work to be able to plan, outline, and write (such a) story. You acquire that understanding by reading (that genre).
2. It is more difficult to write a story from a worldbuilding project such as an RPG game. You will invariably feel the need to include all that worldbuilding into your story. But stories typically aren't descriptions of worlds. (Think of how all the worldbuilding that Tolkien did is not part of the Lord of the Rings.)
What you need to do is focus on the *story* that you want to take place in that world and **leave out as much of the backstory and worldbuilding as you can** without compromising understanding. We really don't have to read a lengthy prologue about how the father of your protagonist taught him how to hold a sword to appreciate that your hero is a good sword fighter.
As for your main question, you rewrite when edits aren't enough. As simple and as vague as that. If your story needs some adverbs deleted, edit. If your plot has taken a wrong turn, rewrite.
But that isn't your problem.

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Review Suggested Edit