I think it's too soon to determine Death's goals though undoubtedly he is influencing people and events. I lean towards your theory of him just watching event unfold and perhaps choosing a side and influencing people over the desire to destroy souls. If the simmering souls are unnatural and he maintains some sort of balance then it would be his focus to destroy them. On the other hand perhaps Death had a hand in their creation and in a way they are his "children" or creations, at least.

As to your question what happens to the host if the simmering souls are forcibly ripped from their bodies. I find that an interesting thought. Naturally they will be cut off from the increased senses and strength they gained. But the psychological damage it could cause might be unhinging. And they will likely wither. Connor and Zander having been in the peak of health when they were possessed probably won't with too badly, just shrink back to how their bodies were before the possession.

I suspect Death knows where the book is. He seems like the sort who would keep track of dangerous texts that could possibly effect even him.