Debt and super/hyper inflation

The debt retains its nominal value, while presumably your wages increase in line with inflation. So the actual burden of the debt falls. However, if the interest rate on the debt can change, then the interest payments may increase in and keep the burden of the debt constant.

I'm no expert but I'll give this a shot.
Insofar as paying down debt reduces the quantity of money in circulation, it takes a bit of understanding regarding how banks create 'commercial bank money'. See this paper. It explains how paying down debt reduces the amount of commercial bank money in the economy.
That debt liquidation leads to distressed selling refers to people clamoring to pay off their debts, by selling their assets at fire sale prices.
Then there's a reduction in the quantity of money, and according to the quantity theory of money, since M falls P has to fall too. To be honest I'm not sure I get how he goes from the velocity slowing to the price level falling, but I take it fischer's paper has a fuller explanation.
The price level falls, and so businesses get less revenue. I don't think this is particularly intuitive, I presume Fisher's paper actually explains the mechanism by which the price level fall leads to falls in revenue (exchange rate effects or what?). But anyway, profits fall, and this leads to unemployment, general gloom, and various feedback loops which cause changes in interest rates (which he defines in a very specific way which I don't understand) and which further the falls in economic activity.
The key takeaway here in any case is that according to Fischer the economy won't naturally adjust to a 'good' path, but continues down one which makes things worse. At best, it comes to an equilibrium only after everyone is severely worse off. That is, until there's some kind of intervention, which when Fischer was writing wasn't really a thing. Now, we have Central Banks and Fiscal authorities (i.e. governments) to provide exactly that kind of intervention.

As an aside, and this isn't in response to anything you said, papers like his are exactly the reason Economics has become mathematical. He takes pages to explain exactly the kind of mechanism he has in mind, because describing mechanisms in terms of mathematical equations again wasn't really a thing at the time. Look at page 343! What a mess!

It's very counter intuitive, but actually when you pay down a loan at your bank, you reduce the money supply not increase it. The paper I linked explains it better than I can! Basically, you can think of the bank using your money to reduce the size of the asset they have on their balance sheet, making it disappear.