Yes, if you want the ESP to act as a WiFi modem for your Arduino then it mist be configured to listen for AT commands from the Arduino and respond appropriately. The firmware that allows it to do this has been overwritten by your sketch, so needs to be reinstated.
Do all of these sensors need to be in one physical location, asn is one sensor required for each measurement?
In practice, I find that most real world projects tend to monitor one or two things in a single location - water level and temperature of a tank in location 1 for example, air temperature and humidity in an outdoor location, plus the same things in different indoor locations, charging current and battery voltage of a solar system in a different location etc.
In this scenario, things like air temperature, humidity (and atmospheric pressure) can be measured with a single sensor. If the things being measured (and presumably controlled too) are physically dispersed then you either have to run wires from each location to a single controller, or have multiple controllers in different locations.
In my living room I currently have around 10 different ESP8266/NodeMCU based devices. Most are built in to switches to control devices that are plugged in to them, but others take temperature and humidity readings, transmit/receive infrared and 433MHz commands to operated other devices or dona single dedicated job in a particular location.
If you do need everything in one physical location then an ESP32 or a NodeMCU with a port expander is probably a much better and more stable solution.
I’d suggest that you have a read of this before you go much further…
Pete.