Every transaction included in a block must be valid in order for the block to be valid. An input can only be spent once, any attempt to spend it again would be invalid. 

So in your example, the entire block would be invalid and thus rejected by the network. Nodes that hear about and attempt to validate the block would get to the second transaction, see it is invalid (because one of its inputs was already spent), and reject the entire block. 

Generally, miners will choose the transaction that pays them the most. The bitcoin-core rules for relaying transactions are separate from this, so they aren’t of much consequence in the real world. A miner could easily run their own modified software that builds blocks in a way they like. Even if a transaction isn’t marked RBF, there is nothing stopping a miner from including a higher paying transaction they heard about instead.