How is this possible? Are they made out of something that is above matter, meaning it can decend to interact with matter but doesnt have to? If so isn't this just another form of matter?
Have you read
Flatland?
What if the (hypothetical) spirit world has another dimension compared to ours? Then those in the spiritual world could observe our world without ever interacting with it by existing outside the hyperplane that is our world or interact with it by moving so that they co-incide with it.
To be honest thought, I find the whole discussion to be absurd. You're trying to see whether you can fit a non-material entity into a materialist world framework - it ain't gonna go.
Perhaps you are a materialist and beleive that there is nothing other than matter, if so you would dismiss sprits as faulty beliefs. If so what is the evolutionary advantage of such beliefs?
There is no evolutionary advantage to such beliefs. There is however a strong evolutionary advantage to pattern spotting, and causal thinking - so high, in fact, that we will spot patterns where there aren't any and invent casual links where there are none. We're not alone in this, Pidgeons do it too.