1) But can't beings be released from Karma by a Buddha or an enlightened being? Didn't Buddha essentially liberate the infamous killer who made a necklace with the fingers of his victims... as well as liberating in this life... many other people?
2) If the above is correct, cannot there are also beings who are not liberated in this life or in other incarnations, but inhabit some type of posthumous life wherein they are the functional equivalent of demons?
If the above propositions are generally correct, then is it unreasonable to think that some demons can be liberated, if not while existing in a hell realm, but - say - from a living person by way of exorcism? If memory serves, is not Tibetan Buddhism deeply infused with native Himalyan shamanism? And doesn't shamanism's chief concern lie in knowing the spirits, living, dead, good, bad, theriomorphic/totemistic, etc . ... and being deliberately possessed by spirits (the famous "Oracle" scene in Kundun comes to mind) - as well as performing exorcisms?
Again, if memory serves, did not the great Tibetan Buddhist Padmasambhava famously perform an exorcism in which he applied Compassionate Wisdom to the demon and persuade it of its own innate Buddhahood and cajol it to "go to the Light", thereby saving the victim as well as guiding the suffering demon toward liberation?
It seems that, rare among world religions, Buddhism includes demons within its paradigm and ethic of compassion. Not even the Christian model does this: while Jesus granted the Garasene demon's ("Legion") request to not be "cast into the abyss", but rather into a swine herd, the result was a mass suicide of pigs - and thus presumably, the actual return of "Legion" to "the abyss". In the rest of the New Testament and Christian history, demons are to be despised, reviled, and banished, with no compassion directed to them; for to do so would be to direct compassion to Satan, "the Lord of demons". Thus Buddhism seems to bring a refreshing, lone beacon of restraint, wisdom, and compassion to this otherwise dark subject.