I was thinking it could be like automatic reincarnation in to a nearby mob, and there would be some type of stipulation or quest on how you would return to your own body, but with a bonus ability you did not have before like eating grass(sheep), big jump (horse) ect. that is until the next time you die. attrition could work here just as well.

The animation for swimming and crawling do not work out side of the player, that might be intentional but then I thought why would it be

Unsure about the demon variant, we'll think about it I guess. The animations not working are a side effect of using the mob's own rendering; if anything though I'd say being able to crawl as a cow is a bug.