[@Slime]
As far as I know there are no side effects. I got the information from the Wiki and the only character I know who uses them is Sion from Melty Blood. They aren't actually 'spells' in the traditional sense, but abilities gained from alchemically altering the brain. At least that's how I understand it.

As for the second question: 

He can read a person's personality from observation and interaction, but if that person is putting forth a 'false' front, then that is what he will see and base his calculations off of. Unless their a bad liar, of course, or suck at acting.