Getting the troll illusion to move in concert with the demon would be tricky. You would normally use Facade for that, but the size has to be close in that case, and it's assumed it doesn't give any offensive/defensive advantage. There's also Light Glamour but that's only for small objects.
If you created a spell customized Facade that does permit a greater size differential, I would treat it defensively as giving the benefits of a Displacement spell. Sometimes the attack just goes through the illusionary body without hitting anything. It would be obvious to the attackers that it did so, but it would be up to them to figure out why. They would eventually realize that they have better chances if they aim lower rather than high (unless the demon is flying inside the illusion).
If the demon was also invisible, it could be moving freely and in that case it would not have to stay within the illusion at all. It could reach out and make its own attacks, moving in ways that don't correspond to the illusion. In that case Displacement for defense and give it a bonus for making attacks. Bear in mind that Phantasm requires concentration to move so, even in this case, you either need a custom spell/item/ability or someone other than the demon maintaining the Phantasm.
You might rule that the illusion is constructed so the demon can see out, but no one can see in. In that case it's possible a character who melees with the creature (especially grapple) will see inside the illusion which might give them clues. Maybe they even see the demon in that case. Demons have pretty extensive sensory abilities though, e.g. darkvision, so it might just be dark in there.
I would allow mental spells to affect the demon normally. I don't think you need to know the precise location of the real head, just get the magic into the aura. If you want you could give an RR bonus though. I would definitely not give any penalty if they used some other spell to contact the demon first, e.g. Presence.
If you are making up a creature and giving it this as a unique ability, you've got some room to decide what will give the PCs an appropriate level of challenge, and you can tweak the modifiers, difficulties, etc however you think will work best. If it was a PC using the existing spell lists, I would enforce how all the spells work pretty tightly.