Learn Finnish: Yöllisenä eläimenä se nukkuu päivällä. - As a nocturnal animal, it sleeps during the day.

They form the phrase "as a nocturnal animal". The essive case ending -nä is used to express a role or state (often translating to "as a"). Because Finnish requires adjectives to agree with the noun they modify, both the adjective yöllinen and the noun eläin must take the essive ending.

Since this lesson covers the ablative of respect, how could we use it to say the animal is nocturnal "by its habits"?

You could use a word like tavoiltaan (by its habits) or luonteeltaan (by its nature). For example, you could expand the phrase to tavoiltaan yöllisenä eläimenä (as an animal nocturnal by its habits). The ablative ending -lta plus the possessive suffix -an tells us exactly in what respect the animal has this quality.

Why is päivällä in the adessive case instead of the inessive case (päivässä)?

Finnish commonly uses the adessive case for parts of the day to mean "during the [time]". So päivällä means "during the day" or "in the daytime", just as yöllä means "at night". If you used the inessive päivässä, it would instead mean "in one day" (for example, completing a task in the span of a day).

What is the function of the suffix in the base word yöllinen?