Rules FAQ
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The card returns to the hand from which it was removed. This happens when Red Priest leaves play or when the round ends, whichever happens first (it is not a choice made by the player when Red Priest initially triggers).
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Reserve is checked in the taxation phase before the round ends, so the card removed by Red Priest would return after that.
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When the card returns to hand, it is not considered to have been drawn.
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Triggering the reaction on Red Priest is optional, but once you trigger it, you must also choose a card to remove even if you would prefer not to.
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There is no cancel window before the post-then aspect of the effect. If you have not canceled the entire effect, you cannot cancel just the part that removes the card. In a Melee game, the reaction can only be canceled before the players know which opponent is chosen.