Because a spirit meshed with one of the living by means of possession is partially involved in the real world, he is slightly affected by things that happen in the real world, namely, to his host. If his host dies while he is possessing her, the possessing spirit must make a Merge roll of Superb difficulty to get out. If he fails, the host's spirit leaves the body before the possessing spirit can escape, and the possessing spirit becomes trapped inside a dead body, eternally. Roll up a new character. Spiritual damage from real-world means is relatively light, though it still occurs.
Damage taken by a spirit is three levels less than what is taken by the host's physical body.
Thus, a possessing spirit can effectively ignore any damage to his host's body that is not of Fair level or higher. Damage done to a spirit is worked out in the same manner that damage to a real person is dealt, except that the damage from physical attacks are reduced by three levels. Of greater danger, though, is damage from within the spiritual realm itself. As was mentioned before, some particularly nasty spirits are roaming the spirit world, and one of the evil things they tend to do is to beat up on weaker spirit forms. Combat done directly between two spirits in the spirit realm is based on the Merge attributes of the two spirits.