What's the deal with "inhabitable"?

Merriam-Webster defines inhabitable as the adjective form of inhabit, which in turn is defined as:

1: to occupy as a place of settled residence or habitat : live in <inhabit a small house>
2: to be present in or occupy in any manner or form

So what's the deal with inhabitable? This has to be one of the most confusing words in the English language. Much like inflammable means the same thing as flammable, inhabitable is the same as habitable, which might be damn confusing considering the in prefix means "not".

Bartleby has an obscure reference to the etymology as follows:

Middle English enhabiten, from Old French enhabiter, from Latin inhabitre : in-, in; see in–² + habitre, to dwell, frequentative of habre, to have; see ghabh- in Appendix I

Ah! Now we're getting somewhere! And what exactly is the second form of the prefix in-? Again, citing Bartleby:

1. In; into; within: inundation. Before l, in- is usually assimilated to il-; before r to ir-; and before b, m, and p to im-. 2. Variant of en–¹.

And that's the deal with inhabitable.