Actually, in the discussion till now we only talk about a single atom, and not the effect of bringing atoms together. This gives rise to behavior that really can not be explained classically. Band formation and ligand field effects are quite complex (not to mention, Quantum Mechanical effects), and we have not involved them in the picture so far.
Electrons are in orbitals
(i) to reduce the repulsion, and
(ii) because of certain quantum mechanical rules that they are forced to obey (Exclusion)