I'd rather have The Kandarian Demon as the Killer than Henrietta.

Jaws could work as a paragraph kind of thing with a map, survivor and cosmetic collection. Maybe a shark head for Huntress, if we ever get power cosmetics, shark based traps for Trapper, etc.

edit: not to forget Shark costume for Clown!!!

(it baffles me how BHVR hasn’t hired me yet)

Simple.

You fly around on the map and possess Survivors to turn them into deadites for a limited time, which would be who you control as the physical killer to hook the other Survivors with, i don't know what power a possessed Survivor would have if they should have any.

Survivors would then have some type of gameplay mechanic that they can use to return back to normal while possessed, similar to how Ash is able to return to normal in ED2, of course what the mechanic is and how fast it can help turn Survivors back can be adjusted and balanced so it's not too easy and fast nor too hard and slow.

Last Survivor could be allowed to be eliminated by either self-hooking or self-mori when possessed.

You could also include the necronomicon which could function similar to the lament configuration, where it's a one time use that helps either the Survivors or the Killer depending on who finds it first. Once it's been used, it will fly to a new location on the map without anyone being able to see it's aura.

I would agree with you if the possession duration was permanent, however since the possession duration would only be for a limited time, i don't see any issue with it as long as you can give the player who's Survivor got possessed some kind of mini game for them to do while possessed that would help them or their teammates in some way or form.

The gist of it is basically that yes.

Granted, it is mostly a rough idea with borrowed elements from the Demon Gameplay in Evil Dead: The Game, you could probably add more elements to it to make it more engaging when polishing it, but at it's core, i do believe a power concept such as possession could work in dbd yes.