\hyphenation{...} list is not used

I think the font change here is probably a red herring: it's showing up the issue as it alters the width of the text, but doesn't actually cause it. XeTeX doesn't for some reason do a good job of showing hyphenation points in 'Satchidānandatīrtha', but if you try using LuaTeX you find that with your example as given you get

Satchidān-an-datīrtha

not the ones you requested. What then happens is that with Brill, which is quite narrow, none of those are near enough the end of the line for TeX to use them as a break point. The result is that no hyphenation occurs and the line is overfull.

If you either move \hyphenation after the beginning of the document or remove the \setdefaultlanguage line then all is well: all of the hyphenation points you set are valid. Thus what is happening is that you are changing language ((US) 'english' to 'british') after you've set up your custom hyphenations: these are language-specific so the ones you set do not apply in your text! I guess the surprise here is that the reset happens at the start of the document, not, as you might expect, when you use the \setdefaultlanguage command.