Ryles had been the Dragons' preferred candidate to take over from the recently ousted Anthony Griffin in 2024 but withdrew from contention on Wednesday morning, leaving fellow NRL assistants Ben Hornby and Dean Young as the frontrunners.
The move appeared to rocket Ryles into favouritism to replace Bellamy when the veteran mentor transitions into a coaching director role, likely from the 2025 season.
But the Storm say Ryles will move to Melbourne from the Sydney Roosters with no such assurance.
Despite an extensive apprenticeship with the Storm, the Roosters and the England rugby union side, Ryles is believed to be keen on further developing his coaching abilities before taking on a top job.
As such, the vacant Dragons position presented itself at the wrong time for the former State of Origin prop.
Ryles won two premierships as an assistant to Bellamy between 2016 and 2020 and will join Melbourne for the 2024 pre-season, having been cut loose by the Roosters mid-year.
"It wasn't an easy decision to make but I am very comfortable knowing I am returning to Storm and can't wait to get back the club," Ryles said.
"This was a decision I made with my family, and I know it will be best for my coaching growth and development.
"I have an enormous amount of respect for the club and couldn't resist the opportunity to return to work with Craig, (GM of Football) Frank (Ponissi) and the football department when it was presented."
Ryles' new deal whittles the Dragons' coaching search down to two candidates: South Sydney assistant Hornby and North Queensland's Young, both of whom won the 2010 premiership as players with the joint venture.
Dragons CEO Ryan Webb said the club remained undeterred despite Ryles' withdrawal.
"It was just about the timing and it not quite being the right fit," he told AAP.
"We had a process in place and there were other candidates. We'll now go back and proceed with that."
The Dragons had been wanting to unveil a new coach in the next week to give the successful appointee ample time to work on the roster ahead of his first season in charge.
There is hope that having a highly rated coach on the books imminently can entice players to the Dragons, who have struggled to lure marquee talent on the back of four consecutive seasons out of the finals.
"There's that piece when you're looking to extend current players," Webb said.
"It's also getting to this period in the current NRL season where player movement opportunities start to present.
"You've also got to manage your cap, you can't go bringing in players that a new coach doesn't think fits his system or his style.
"It's one about retaining what you've got but two about opportunities, and you want to be able to take advantage when the right one presents."
Webb was hopeful bringing in a new coach would not necessarily mean overhauling the rest of the football staff and believed there would still be room at the club for current interim mentor Ryan Carr.
"I'd suspect whoever comes in will have a few other pieces to come in there and support," he said.
"(But) we've got lots of good people. Carry is fantastic and he's doing a good job.
"I hope we can keep the bodies we have here now and just add to those to bring some more skills and expertise."
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