Question if I use WoM (on a villain who dishes out damage) can I choose that villain as the target for the reassigned damage?
you can not use Wrest the Mind on a villain, this is corrected in the Enhanced Edition and also in the errata.
However, generally speaking, yes, the target under WtM is a viable option for redirecting damage to. (IE: Yes, you can make things attack themselves).
I think he means on a "villain target", not the Villain Character Card.