Demons can manifest in a number of ways but I do not think they can take on human form anymore. Why? Because if they could take on human form they could have sex with humans like many believe fallen angels did before God flooded the world during Noah's time.
2 Peter 2:4 (KJV)
4 For if God spared not the angels that sinned, but cast
them down to hell, and delivered
them into chains of darkness, to be reserved unto judgment;
Those sinning angels are now in chains. I admit this is not the only interpretation that is made of this and other scriptures, that this may refer too such as
Genesis 6:1-5 (KJV)
1 And it came to pass, when men began to multiply on the face of the earth, and daughters were born unto them, 2 That the sons of God saw the daughters of men that they
were fair; and they took them wives of all which they chose. 3 And the LORD said, My spirit shall not always strive with man, for that he also
is flesh: yet his days shall be an hundred and twenty years.
4 There were giants in the earth in those days; and also after that, when the sons of God came in unto the daughters of men, and they bare
children to them, the same
became mighty men which
were of old, men of renown. 5 And GOD saw that the wickedness of man
was great in the earth, and
that every imagination of the thoughts of his heart
was only evil continually.
See also
Who Were the “Sons of God” and the Nephilim? (Genesis 6:1-4) or
Angels Marry Women? (Nephilim, sons of God, and Genesis 6:1-5) for both views on this.
As to reading your mind, they cannot. However, they can test what you are thinking by speaking lies and judging your reactions.