There are many misconceptions about Revelation which have been ingrained through centuries of casual surface reading, if not outright propaganda. And, this is one of the most misunderstood. The text does not say that the 1,000 years is a reign of Christ. It says that those beheaded for the witness of Christ would reign with Him for a thousand years.
These martyrs had been beheaded, so they were dead. The righteous dead have passed from mortal life to immortal life, so they were not living on earth any more. They went to be with Christ, and Christ had ascended to the Father after He had appeared to His disciples for a few days (Acts 1:9). As Christ was in heaven, then so were the martyrs in heaven with Him, and the time that they would reign with Him from heaven would be a 1,000 years.
The "thousand" in Rev. 20:4 is not literal. A word study on "thousand" throughout the OT will show that is literal when counting something, ie. coins, people, etc. But, in prophesy it is symbolic for fullness / completeness of time. And, in Rev. 20:4 it means that the martyrs would reign with Christ for a number of years that God would determine as full or complete.
A careful study will show that there is a prior "thousand years" / fullness of time in vs. 2 & 3 that the dragon was bound. We know that it was a different period of time than the "thousand years" of vs. 4 because the dragon was loosened in vs. 7 while the saints / martyrs were still reigning with Christ in heaven.
The rest of the dead were those in Hades Paradise and Hades Tartarus (Luke 16:22-31), who had been waiting ever since Abel had died for that moment in time... namely, the destruction of Jerusalem and that old Mosaic sacrificial temple in AD 70. In Matt. 22:1-14, the parable of the wedding feast is a very short precis of Revelation as it lays out the sequence of events:
- The call to the wedding (the gospel call of Christ)
- The messengers are killed (Christ and the apostles)
- The king destroys the city (Jerusalem, AD 70)
- The wedding and wedding feast take place immediately afterwards
- Judgment occurs at the wedding feast.
Those clothed in the proper wedding garments (those clothed in the righteousness of Christ) were reclining, thus at rest. The one not clothed in the proper wedding garments / not clothed in the righteousness of Christ was bound and cast into outer darkness.
All of this is repeated in Rev. 20, and the judgment that occurred after Jerusalem was destroyed in AD 70 was when the separation occurred of the rest of the dead that had waited in Hades for thousands of years. Those in Hades Paradise that had already been determined as the faithful when they died were separated to the right, and those in Hades Tartarus that had already been determined as unworthy to the left (Matt. 25:31-46).
The sheep were taken home to heaven with Christ where they continue to reign with Him forever, and the goats were cast into the lake of fire (Rev. 20:15) where the devil, the beast, and the false prophet had also been thrown.
Hades had been a prison with gates, and Christ held the keys (Matt. 16:18; Rev. 1:18). No one could ascend to the Father before Christ's atoning sacrifice. Christ went to that prison after His death on the cross (1 Pet. 3:19) to tell those spirits waiting there that the time was shortly coming for them to be released.
Ever since that corporate judgment, which Christ told those in the first century that He was bringing with Him when He came back to them (Matt. 7:2; 10:15; 11:22; 12:18, 20, 36, 41, 42; 23:33, etc), everyone since that dies in the Lord goes home to heaven. Rev. 14:13,
"And I heard a voice out of the heaven saying to me,
Write: Happy are the dead who in the Lord are dying from this time!'Yes, (saith the Spirit,) That they may rest from their labours -- and their works do follow them!'" (YLT)
For the last 1961 years, or thereabout, everyone is judged individually as we pass from this mortal life. Those counted worthy are resurrected, changed in the twinkling of an eye, and taken home to be with the rest of the saints in heaven(1 Cor. 15:51-53; 1 Thess. 4:16-17). Those not worthy are judged and sentenced and cast out.
Judgment has been an on-going process on both a national level and an individual level from the throne of God in heaven, and Christ - our High Priest - does not have to come down to the earth to do it.
Rev. 20:4 never says anything about Christ reigning from an earthly physical kingdom.
There are many more misconceptions of the scriptures that must be corrected for the prophesy to be understood. All of the NT was telling those of that special generation of the first century AD when Christ walked on this earth that those were the last days of the old Mosaic sacrificial covenant. The only generation that could have a second appearance of Him (Heb. 9:28) was the one that had seen Him the first time in the flesh (1 John 1:1). See also Matt. 24:34; Mark 13:30; and Luke 21:32.
All of Revelation is traceable to the OT, and the OT is the source code for not only Revelation, but all of the NT. I have many articles posted at my blog here that provide many scriptural evidences for both Christ's first and second "comings", or appearances in the first century AD. The best starting point is at the bottom right margin with "It's Not The End of The World- Part I" and then read through Part X.
You can also find many good studies at preteristcentral.com here