What is the consensus today regarding dybbuks, demons and possession? Do we attribute these things to mental illness or do we acknowledge their existence?
In practice nowadays in Israel, Gedoley Hador encourage people to consult a psychiatrist. In most cases, antipsychotic treatments are successful.
According to the Diagnostic and Statistical Manual of Mental Disorders, almost in all cases, the patients fulfill criteria of schizophrenia. Below, I will paste some sentences from the DSM 5, the last version. One of the key features that define the psychotic disorders is delusions.
Delusions may be called bizarre or non-bizarre. One of the critera which characterizes a delusion as bizarre is: clearly implausible or not understandable to same-culture peers and does not derive from ordinary life experience.
Another key feature is hallucinations. They are perception-like experiences that occur without an external stimulus. Auditory hallucinations are the most common in schizophrenia and related disorders. Auditory hallucinations are usually experienced as voices, whether familiar or unfamiliar, that are perceived as distinct from the individual's own thoughts.
Culture-Related Diagnostic Issues: In some cultures, visual or auditory hallucinations with religious content (e.g., hearing G_d's voice) are a normal part of the religious experience. (Among Orthodox Jews this is not the case.)
Culture-Bound Syndromes. (from Synopsis of Psychiatry. Kaplan & Zadock, eleventh edition). The dichotomy between syndromes that are "culture-free", emerging from Euro-American and European societies, and those that are "culture-bound" emerging from everywhere else, is of course patently false.
Possession Syndrome is described in almost all countries around the world.
Nowadays, almost all Orthodox Jews are wholly congruent with the Euro-American and European cultures. The dibbuk is not culture-bound at all. The Rabbis and pseudo-rabbis that practice exorcism with big rewards for their magic services are either impostors or odd people. Almost always, the patients will come to psychiatrists.
In ancient times and other cultures, possession syndrome was perhaps another phenomenon. Ethno-psychiatry is very interesting. We can see many case reports in Africa before 40-50 years ago. In Israel, Arab villages and Ethiopian migrants provide possession syndromes that are culture-bound.
Rabbi Elchonon Wasserman, a close talmid of the Chafetz Chaim, supposedly was involved with a dybuk. The Artscroll biography of him says he would repeat the story every Purim. See here.
This is also recorded in the book Lev Eliyahu compiled by Rabbi Shalom Shwadron (Sefer Bereishis, pp. 28-31). See here for a translation.