I agree with Galuf on the arrows of dispelling....
But make sure that your mage either has a fully charged Wand of Monster summoning or alot of Monster summoning spells and has as many magic missile spells memorized as possible. Also make sure to arm all your archers with +2 arrows, your slings with +2 bullets, or your crossbows with +2 bolts.
Before you enter the cellar, cast Protection from Evil and haste on the whole party. Have your mage protected with Mirror Image and the Minor Globe of Protection. And then enter the cellar using the Loose triangle formation (so that you're spread out once the cellar loads). Once you enter the cellar, immediately have your mage Summon Monsters around the middle of the Cultic Symbol before any dialog starts. Once the diag is finished, the demon is summoned up and should be surrounded by any Monsters you summoned. Now kill the talking priest and then start taking out the rest of the cult members while your Mage continues to Summon Monsters around the Demon to keep him at bay. Keep an eye on your party photos. If you notice a strange symbol resembling a "cobra snake" or a "ghost" on one of them, have the archer with the dispell magic arrow shoot that player to dispell that evil affect. You don't want any player to be affected by that for too long, trust me. Once all the cult members are dead, start firing away at the demon with all your +2 missiles and have your Mage start casting Magic Missiles.
This is how I did it. And every one of my party members came away totally unscathed.