Let's suppose I'm playing The Gathering and am engaged with the Ghoul Priest. I control let's say Leo with 2 of both Sanity and Health. The Ghoul Priest attacks dealing 2 damage and 2 horror. Can I assign all of it to Leo? In other words, can an asset who already dies from one of them take enough to die from the other?

Me and my regular play partner had a similar discussion! Yes, you allocate damage to all cards receiving it, making sure you don't allocate more than any asset can take, then you apply it all simultaneously. That means that an ally asset, like Leo, isn't 'killed' or driven 'insane' by one thing or the other, it all happens at the same time. So in summary, he can take 2 health and 2 sanity damage.

Yes, you resolve the effects (i.e. - dead/insane) AFTER placing all horror and damage. You just can't assign more in either than they can take. If they have 2 health and something does 3 damage, you can only assign 2 of the damage to them.

Thanks!