[SalesForce] Formula using INCLUDES function – how to reference merge field

Use WhoId rather than Who.Id. Don't wrap it in the TEXT function either. The value is an Id which behaves as text already. This formula passes a syntax check just fine:

CASE(
    LEFT(WhoId, 3),
    "003", "Contact",
    "00Q", "Lead",
    ""
)

Please note if you are trying to access this data via SOQL, you do not even need a formula. You can query or filter on Who.Type.

SELECT count() FROM Task WHERE Who.Type = 'Lead'

Editing this answer to reflect a better understanding of what you want to happen. I believe the ask is this:

1. When verified complete, update to 'B'
2. When ok for production, update to 'B+'
3. When activated, update to 'A'.

As mentioned by Derek, formula fields don't update anything; they're calculated dynamically every time that they are viewed, but no data is stored internally. You can however simulate the above behavior with a formula field, essentially by reversing the order of your comparisons -- checking last to first.

1. If activated, display 'A'
2. Else if ok for production, display 'B+'
3. Else if verified complete, display 'B'
4. Else display 'null'

CASE(OHSI_Status__c,
  "Activate",
    "A",
  "Ok for Production",
    "B+",
  CASE(Status__c,
    "Verified Complete",
      "B",
    "null"
  )
)

Alternatively, if you want to actually store the data on the record, you can create a picklist field instead of a formula field, and give it three values, 'B', 'B+', 'A'. Then, create three workflow rules that run every time the record is updated to match the criteria for their related statuses, and then perform a field update to the new picklist, with the appropriate value. There are several benefits / considerations to using a real picklist instead of a formula, including,

• Formulas can be less efficient if you have to use them in report / SOQL filters (displaying them is fine)
• Reports can provide users with the three options to filter on ('A', 'B+', 'B'), whereas report filters on formulas don't have preset values to choose from (the user has to know the three options ahead of time)

Two final notes, last I checked, formulas should use double quotes when defining string literals (Apex is single quotes). Lastly, I used case statements for the picklists above, as I find them a bit more readable than chained IFs, especially with a lot of values. But that's personal preference; both will work.