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In short, it is implied he embodies one of the Gods of Xiansie -- the God of Thieves, to be exact. He was a trickster and adventurer, and for the past few centuries -- millenia? -- has traversed Sanctuary. He even claims to have met Zoltun Kulle!
H never gives you any straight answers but is a wily old coot who imparts a few nuggets of... wisdom. He has experienced all that is good and bad in the world, all its... dichotomies.
And is obsessed with finding a certain Jewel. A Jewel that imprisons a dread demon.
Just as Malthael became obsessed with finding the Worldstone, which eventually turned him mad.
Could Shen the Jeweler be Malthael's human incarnation in Sanctuary? That he's gone mad over the past 20 years searching Sanctuary for it, losing himself in the lie that is Shen?
mathael is searching pandemonium, not sanctuary. therefore, he wouldnt be the The jeweler, because he wouldnt be on the world at all.
Edit: Also, he didn't go mad searching for the worldstone, he left the council of angels because he couldn't handle the destruction of the world stone. Tyreal says he went mad, but that's the only thing we could go off of to say he was "mad".
Angels also don't reincarnate as other things, if one dies or is changed, new angels are reformed to take the place of them.