I was in a dungeon and during an encounter I had 4 of my characters diseased. I did not have a priest spell to cure them. I managed to get out of the dungeon and go buy a cure disease potion for two of my characters. They still have the confused icon on them and they attack each other or just babble and foam in combat. Usually when I rest this status goes away. Since my characters were diseased I can't get this status to go away even though they drank a cure disease potion.

That's strange. To be honest, I started GoG version of W8 few days ago and also noticed few things that are not working properly. Combat log is giving me false messages for example.

When you say your characters are diseased, are they showing a red blood drop by their avatar? If so, you need to use a Renewal potion. You can buy these from Braffit in Arnika - forgive me if I've not spelt his name quite right :)

If they are showing a rat's head beside their avatar, than a cure disease potion should do the trick but, if it's a very powerful disease, you may need more than one.

By the confused icon are you meaning the straight jacket icon? I ask as it sounds, from your description, as if your characters are insane. If so, a lot depends upon the strength of the spell your characters have fallen under. Sometimes, it can take more than one rest to dissipate. There isn't a potion to cure insanity, you can buy rings to restore sanity to your characters tho' and there is a spell which can be learnt a way into the game.

I hope this helps.

This might be the case. If you click the insanity icon, you should see all the statuses affecting the character.

If they really are not diseased anymore and you cannot get rid of the insanity, then maybe some Wiz 8 save editor would help you. I don't have any experience with any myself, though.

I am playing wizardry 7. I had an encounter with munks. I can't remember the name of them I think it was frothing munks. They diseased my characters. It had the nauseated icon over them. When I rested my health and stamina wouldn't recharge. When I rested more status effects would stack up on my character. I would get poisoned, paralyzed, blinded, irritated, a 2nd nauseated icon, and insane all at the same time. I rested more and they wont come off and my characters are even permanently losing 1 maximum hitpoints. My samurai went from having 77 MHP to 76 MHP. My valkyrie went from 74 MHP to 67 MHP before I could buy a cure disease potion. I went into town and bought a cure disease potion and it took a nauseated icon off my character. Still the rest of the negative effects wouldn't come off. I luckily just gained a lvl with my priest so I learned sane mind and cast it on the character I just cured with disease. I used a 7 level sane mind and after I rested again the insanity came off. It was just weird because none of the status effects like paralyze or insanity would wear off by resting I had to use a potion or spell. I didn't have a lot of these cure spells on my priest so this was almost game breaking for me.

It seems to be a bug-- I had the same thing happen when I tried to take the wand in the museum. I let the disease run too long and the champion went insane. There is a fix, however. If you go to Munkarama and get one of the Dark Forest Munks to cast confusion on the champion who is insane, then it will override the bugged insanity debuff and eventually wear out. It didn't work perfectly (ie everyone else's insanity still disappeared before the bugged champion) but eventually it succeeded. I was also casting a lv 1 cure insanity from time to time.

Now sounds to me like a wasted training opportunity :P
Cast cure insanity once and then hit shift + M Five times per second and watch the Psionics on your Bishop, Monk, Psionic fly up the scale.