You would start with 1 level of insanity for every extraordinary attribute you’ve invested points into past the first one. Any time a human gains Insanity, the transformation progresses, so yes you could start at stage 1, 2 or 3, if you’d chose to. Going beyond that is pointless for a player, because than they’d have no character to play. There is no bonus to this, besides having the extraordinary attributes, but I’m thinking about adding a custom feat to allow Humans to access another extraordinary attribute, because either their Spirit is particularly poweful or because that Human’s mind can handle two spirits.
You don’t gain Cosmetic Deformity from Insanity, as those are limited to “mental” flaws, which is loose enough, but Cosmetic Deformity doesn’t make sense to include in that list. I am considering though to add a special campaign flaw to represent the social stigma of visible signs of transformation better, and then the players could chose to downgrade that flaw into Cosmetic Deformity with the help of a feat, but it’s only an idea so far.
I’ll think about something to represent that gradual decline, but I don’t think that taking over a character as a GM, especially during the action, is the way to go, because most players I know would rather see their character die under their control, than having to watch someone else screw their character up without a way to intervene. That would be d**k-level GMing.
How about this: Any time you take Sanity damage there is a chance that you lose control over yourself and that your haunting take over your body. The further you are along the stages of your Transformation, the more often this will occur, as your mind becomes more and more vulnerable:
Stage 1: Whenever your Sanity takes 10 or more damage during a short amount of time
Stage 2: Whenever your Sanity takes 5 or more damage during a short amount of time
Stage 3: Whenever your Sanity takes damage
Whenever these conditions are met, they trigger an episode during the next rest, during which a person might not remember everything they have done or they might behave in an alienating ways, which could raise suspicions in their social surroundings.