Translation:He believes he used to be a king in his previous incarnation.
"The last incarnation" is right now---the present life. So he would have to have been a king in an earlier incarnation, in a past or previous life
No, the last incarnation refers to the previous existence in a corporeal form. Right now, the present life, this is the current incarnation.
i think she could be right when you consider the ambiguity in the word 'last' - it could mean the 'very latest', in which case she's right. it could also mean the 'one just prior to this one', in which case you're right. good old english again!
"The previous incarnation" sounds strange to me because I would always say "his previous incarnation" in this English sentence. "A previous incarnation" seems natural, though.