I'm hope that Luna knows what she is doing. I would rather not be responsible for a bad roll, but the other option is giving them immediate PTSD which can't be good for their mental health.
The question of how much we mess with their minds is of weighing principles against the risks of life and death. I think that the government likely won't be investigating 'some weird dreams'.
Eye witness accounts become less reliable over time. The things the government might reliably discover are:
1. That we were active around this time.
2. There were no other scouts present.
3. There was a man with a mask.
4. We may have access to memory alteration magic
This fourth point I find the worst that is why I opt for complete erasure, any government will understandably be quite interested if they learned of it's existence.
[x] [Memory] Completely erase their memories of being possessed