That seems correct
You killing your target is the possessors interaction. Which you then interrupt with your own action by killing yourself thus saving your target from the possessor. (I mean what outcome were you expecting? If the King just died then you clearly didn’t complete your action. If no one died then the Possessor clearly didn’t complete HIS action. And finally if the Possessor died then you just completed an action unrelated to what Defend is)
Eh don’t think about it law wise
It’s not a bug.
yup, possesor does not interfere with anyone’s normal night actions. Hence when it doesn’t make you kill yourself, you still investigate, occupy or whatever you wanted to do without even having a clue that you also murdered someone. Pretty much the only way to outright know you were possesed, would be if an observer see’s you visit, or the possesor visit you, or if the attack gets you killed by hitting a knight or hunter. But that is all working as intended.