Is there a way to possess only one unit at a time and allow the AI to control everything else in battle?

If there was a button that said "auto-resolve turn" when possessing stuff as the GM, that would work. You hit that button and the AI would take over for the rest of the possessed unit's turn.

Is there some way via modding to make it so you only possess one unit in battle?

GMAddon1: Adds almost every single monster and NPC from the main campaign into GM mode, plus a few large custom maps to use in GM mode.