I don't think your bf% will increase. Your total bf weight may increase but so will your total non-bf weight. In my opinion, the adaptations you have gained up to this point aren't worth dieting away now.
I guess it comes down to what do you want more. A 500 lb squat or a lower bodyfat percentage now? I suggest the 500 lb squat, you may be surprised at what your bf % ends up being in the end.
If you need more recovery there are several things you can do on top of eating more and getting better sleep. Take a look at your programming, do you think you could get away with deadlifting less, do you think you need a recovery day on squats midweek, etc.
First order of business should be getting you a little more recovery in your program for now while you feel a little burnt. Just keep progressing and save the diet for the end.
Again it depends on your goals. I personally want to squat over 500 and deadlift over 600 more than I want my abs back. I had them [the abs] for so long that I think that I can get them back whenever I feel like it.