Why does Dean tell Tessa his body will rot in the ground, when hunters are traditionally burnt on a pyre?
Dean was dying and may not have been thinking completely rationally. He was bitter, and angry, and the idea of rotting in the ground is more disgusting and feels less noble than being burnt, so that may have been the imagery that came to mind at the time.
How does the Yellow-Eyed Demon take over Tessa's body when she's incorporeal?
Because the demons are incorporeal as well, traveling like smoke through the air. It's not stated that they can't possess another incorporeal being.