I know that a demon doesn't need a human body in order to manifest to people, but in this case Meg was right in front of them.How could they not understand that the demon was using her meatsuit?

Actually, some demons can take the shape of humans without possessing a body. Remember the demon in All Hell Breaks Loose? It took the form of a little girl. They don't use those kind often in the show, they seem to prefer the human possessed kind but it was a possibility that Meg had just assumed that shape and wasn't possessing someone.

You're right fanfly!!!Major thanks!!!!!:D

*clearing throat* fanfly, could you be more awesome? i doubt that :D:D
i second that, you're right :)

*blushblushblush* XD

Dean and Sam knew that Meg was real after finding out who she was and where she came from in Shadows. They knew that Meg really existed they just did'nt understand and Bobby in Devil's Trap tells Dean he has to be careful because she is just a girl.

ohh :) also - what fanfly said :P

Up 'til then they only had what, four possessions per year, maximum, so not much experience there; and like Fanfly said, they have demons that can take shape, like the Daevas, and the one from AHBL-part one. But in Devil's Trap they had near to no idea how demons worked, they had only seen one in Phantom Traveller and they used the Rituale Romanum- which is described as expelling the demon from the body, when it becomes more powerful, and only after sending it to Hell, without need for a Solomon's Key.

What I am trying to say is that they didn't know what they were dealing with, and couldn't afford to say anything was obvious.