The way I ran it was that the rakshasa was a master of illusion who disdained evocation spells and had the party fooled about what it was they were facing. Now, I had to admit that the players had discounted a rakshasa as a possibility due to their thinking it would have been too tough a creature for the party. I wasn't running it as using huge killing spells, I chose what would allow it to survive if it was smart.
They knew there was something that was able to murder people by ripping the bodies apart, and not be noticable. they figured it must have some great surprising ability. They thought a werewolf was most likely. The rak was having an affair with the female rogue in the group; but used the mind reading to know what it was that would appeal and excite the woman best. IF there was something odd that come to mind, he was able to generate a small illusion, like making a piece of mink fur show up on the bed to expalin the 'furry feeling' while he stroked her naked body. The rakshasa was very arrogant in his estimation of his ability to survive on his wits and magic.
They did go through a bit of detective work, then a cool fight with running commentary from the 'wolf'; which they admitted later should have clued them in that the wolf form shouldn't have been speaking. As it was the rak died due to injuries from the magic sword; then later the rogue found out she was pregnant. Her research after they had defeated it clued her in that rakshasas would inhabit an unborn child to recover from death and she realized that she was likely carrying the rakshasa!
Interestingly enough, the player's decision was that the rogue would leave town, with some of the rak's items that she took as her share and hooked up with a rich merchant for a voyage to a different country. When she got there she let the merchant know he was a father.... That campaign ended there but it was fine setup for a future encounter somewhere along the line.