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RTS is correct for the reasons he gave. But Jacob can't enter battle again that turn, right? He withdrew, so he is done for the turn, right?
Unlimited loops are not good for the game.
The withdraw special ability either allows a character to exit battle unharmed or it forces an opposing character to leave the battle unharmed. Once a character withdraws from battle, the character may not reenter battle during the same turn.
I'd just get around it by banding Seraphim to Jacob and using In the Clouds, which resets the characters in hand.
Yay! I'm relieved I've been ruling it correctly.
If a character is forced to withdraw (e.g., Darkness (Warriors)) or withdraws from a battle voluntarily (e.g., Highway), it may not re-enter the current battle (see Withdraw in the glossary of the rulebook [p. 54]). Moreover, the character may enter on a new battle on the same turn (e.g., The Long Day).
The incredible blue recurrence card, Jubilee. It's from a starter deck, too, I believe.