Realistic and diverse traffic simulation is essential to autonomous driving development. Yet prevailing benchmarks predominantly reward realism, and recent methods have optimized accordingly, leaving diversity underexplored. We introduce \textbf{Flow-ERD}, a multi-agent simulator that pursues realism and diversity jointly. Its backbone, \textbf{Agent-Type Aware Flow Matching} (AFM), couples flow matching's multi-modal expressiveness with type-specific kinematic execution. It preserves fine-grained diversity while keeping motions consistent with each agent type. A second stage, \textbf{Entropy-Regularized Distillation} (ERD), fine-tunes the closed-loop rollout distribution with an entropy-regularized reverse-KL objective. This mitigates covariate shift while explicitly preventing collapse onto high-density modes. We evaluate Flow-ERD with a log-free diversity metric alongside standard realism scores. Flow-ERD ranks first on the WOSAC test benchmark and dominates the realism--diversity Pareto front among reproducible baselines. Our project page is available \href{https://seulbinhwang.github.io/flow-erd-project-page/}{here}.
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