What does Lutheranism teaches about demon possession?

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I can only answer that part of your question concerning Martin Luther's views. There are a couple of entries in his Table Talk (translated by William Hazlitt) in the chapter headed β€œOf the Devil and his Works” about this:

We cannot expel demons with certain ceremonies and words, as Jesus Christ, the prophets, and the apostles did. All we can do is, in the name of Jesus Christ, to pray the Lord God, of his infinite mercy, to deliver the possessed persons. And if our prayer is offered up in full faith, we are assured by Christ himself (St John xvi.23) that it will be efficacious, and overcome all the devil’s resistance. I might mention many instances of this. But we cannot of ourselves expel the evil spirits, nor must we even attempt it. DCXXV

Men are possessed by the devil in two ways; corporally and spiritually. Those whom he possesses corporally, as mad people, he has permission from God to vex and agitate, but he has no power over their souls. The impious, who persecute the divine doctrine, and treat the truth as a lie, and who, unhappily, are very numerous in our time, these the devil possesses spiritually. They cannot be delivered, but remain, horrible to relate, his prisoners, as in the time of Jesus Christ were Annas, Caiaphas, and all the other impious Jews whom Jesus himself could not deliver, and as nowadays, are the pope, his cardinals, bishops, tyrants, and partisans. DCXXXVI

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For more information, let me recommend the following resources:
1. Robert Bennett, CPH, "I Am Not Afraid: Demon Possession and Spiritual Warfare"
2. Robert Bennett, CPH, "Afraid: Demon Possession and Spiritual Warfare in America"
3. Darrell McCulley, "The house swept clean : a biblically balanced pattern for the diagnosis, exorcism, and pastoral care of the victims of demonic possession," available here: https://scholar.csl.edu/osp/1/

In brief, the Lutheran church has been a bit lax and lazy in this area, but these resources were written with the aim of awakening our pastorate and seminaries to the realities of demonic possession. I'd recommend starting with #2 or #3.

Coincidentally, I'm still working out whether or not Christians can be demon-possessed. Bennett believes so, while McCulley doesn't. But since CFW Walther, Martin Luther, and Franz Pieper also did, I'll go with Bennett's conclusion!

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