IMC, you certainly can flood areas with corrosive magical energy and scream "Squeal for me, demon! Squeal like a piggy!" and it works rather like flooding an area with fire does for humans. Sure, you may not be able to Pilum of Fire a human you can't see, but that's OK...
I think my take would generally be that you can target the demon if one or more of its powers are in effect and can be detected, which is specifically catered for in RoP:I.
I'm inclined to favour the A&A interpretation as a general rule as targeting an individual is not the same as targeting a space and thereby affecting anything within that space. An individual is a significant mystical concept and doesn't, as far as I can see, extend to "a separate entity occupying the same space as the individual".
Plus it makes possession that much more scary if you can't just multi-cast DEO at the possessed child and destroy the demon.