Do enemies respawn infinitely in Strahd's Possession? I can't even get past the first map due to how many wargs are constantly attacking me. How the hell did anyone finish this game back in the day?

Some monsters in the overworld do respawn, when you leave the map and return. So that's what happens when you retreat to the cellar below the hut to heal up. But eventually you'll have explored that whole area, found all the NPCs and picked up all the important items and then you'll move on to the next map. The wargs won't stop you much.

I've been told monsters don't respawn in most of the dungeons. Is that true?

That's true.