dtgreene: REST doesn't cure possession. To do so, you need to use DISP (3rd level Wizard spell, unless that's changed) or one of the more powerful spells not present in BT1. Alternatively, in BT1 there's an item called the Exorwand; that item casts DISP when used.
jsjrodman: In the original game, you could only have one type of status effect, so the NUTS overwrote the POSS, so fixing NUTS afterwards left you unpossessed. The way things like STONED worked is the hitpoints were reduced to 0 at the same time so fixing STON would leave a character still DEAD.
It seems here that stacked statuses were implemented, but not all the spells were re-evaluated to make sense in this scheme. Since Mind Warp specifically tells you it's good for posesssion, it should expliictly remove that.
Just tested in the Apple 2gs version; casting Animatye Dead, then Mind Warp, on a possessed character results in the character's status still being displayed as Poss. REST doesn't cure it, but DISP will, leaving the character in normal condition, but with 1 hit point.
(Interestingly, I remember ANDE setting a character's HP to 100, *even if the character's Max HP is 0.)
By the way, could someone test ANDE, then DISP, on a dead character? In classic versions, this allowed for resurrection before learning Beyond Death, but it took two actions and cost more SP than just casting BEDE in the first place.
Also, characters animated by ANDE could attack from the back rows, and Doppleganger type enemies could, if your party is full, attack from the third or fourth monster rank.