I tried to solve this with geometry and how the arithmetic operations on complex numbers can be interpreted geometrically.
- By dividing two complex numbers, their arguments (angles, $\varphi$)
are subtracted.
- If $w$ should be real, its argument has to be zero.
That means $\varphi(z) = \varphi(1+z^2)$.
Here's a little sketch of both those complex numbers drawn as arrows in the complex plane:

You can see $z$, $z^2$, $1$ and $1+z^2$ in green. I also added the arguments of $z$ and $z^2$ in red, for no real reason (pun not intended) other than to remember that they have a constant ratio of $\varphi(z) = 2\varphi(z^2)$. So you can't do much about that, but $\varphi(1+z^2)$ is a whole 'nother story, because of the $+1$
The true goal is still to line up the green arrow (i.e. $1+z^2$) with $z$.
In order to be lined up, one has to be derivable from the other by multiplying with a real number $a$. I guess this is called "being linear dependent", but am not sure. Anyway, the formula for that looks like that:
$$
\begin{align}
1+z^2 &= az\\
z^2 -az +1 &= 0\\
z_{1/2} &= \frac{a}{2} \pm \sqrt{\left(\frac{a}{2}\right) ^2-1}\\
\end{align}
$$
This is kind of a good thing, because there's $\pm$, which means this is a two for one. And circles aren't functions because they need two lines. So maybe we are on to something here. Let's see if the above formula can be squeezed into being a circle.
You said $z= x+iy$ where $y \neq 0$ and that means there has to be an imaginary part, so whatever $a$ is (cannot be bothered to calculate it), the term under the square will be negative and by that forces $z_{1/2}$ to have an imaginary part.
$$
\begin{align}
z_{1/2} &= \frac{a}{2} \pm \sqrt{(-1)\left(-\left((\frac{a}{2}\right) ^2+1\right)}\\
&= \frac{a}{2} \pm \sqrt{-1} \sqrt{-\left(\frac{a}{2}\right)^2+1}\\
&= \frac{a}{2} \pm i \sqrt{-\left(\frac{a}{2}\right)^2+1}\\
&= x+iy\\
\end{align}
$$
Finally, what's $|z|$?
$$\begin{align}
|z| = |z_{1/2}| &= \sqrt{x^2 + y^2}\\
&= \sqrt{\left(\frac{a}{2}\right)^2 + \left(\sqrt{-\left(\frac{a}{2}\right)^2+1}\right)^2}\\
&= \sqrt{\left(\frac{a}{2}\right)^2 -\left(\frac{a}{2}\right)^2+1}\\
&=1
\end{align}$$
I'm not sure if this is rigorous enough to be a proof, but you just asked to show it, so I hope this is ok and offers a bit of a different approach.