Can it be used as a defense or does it violate the separation of church and state thingy?

Just give Dean and Sam Winchester of Supernatural a call

Demons are not real according to the medical association
So if you are possessed you are experiencing a mental breakdown
So the answer is Yes. We live in a sad time

Demons are a sign of powerful street drugs.

You would most likely be deemed nuts and committed to a psyche ward

If you think its not real just watch The Exorcist

it's really hard to prove that since you were there and it was your body that was possessed it wasn't you. there is also high likelihood that you could be possessed again, so , you need to be secured to not hurt the public.

that would likely be a psych facility.

Naw, but post pardum depression is apparently a defense for anything.