Is it permissible for the third congregant to stand next to the second congregant in the same row as the Imam, instead of alerting the second congregant to step back to form a row behind the Imam?

It is permissible for a single congregant to delay slightly so that another congregant can join him. This is a minor movement that does not invalidate the prayer. The Prophet, peace and blessings be upon him, moved Jabir from his left to his right, then he moved Jabir and Jabbar to stand behind him after Jabbar arrived. Similarly, it is permissible for the second congregant to stand to the right of the first congregant, as the author of Az-Zad stated: "Congregants stand behind the Imam, and it is valid for one to stand to his right."