Okay, let's use the case of Farnando Vargas here. Fernando Vargas was on a hot streak winning the IBF 154 lb title and is undefeated. The only blemish of his career a tough win over Winky Wright. Come Felix Trinidad and we are left with a guy who got dropped by Wilfredo Rivera and has never tallied another official win. He was not the same fighter anymore. Now the question, why would a fighter as good as him be ruined in one fight? Was it due to his psyche being ruined or his body was truly beaten up. It's also a wonder why some guys still can make it back even from such a severe loss and be successful. Duran did it. Some guys went through a lot of wars but still managed to be effective afterwards. Morales and Barrera for example. What happened with Vargas? Also Donald Curry and Kevin Kelley?
It's both mental and physical, but moreso mental. The mental impact of taking a loss, especially when you're accustomed to being this undefeated, big shot... it's sobering. It brings you down to reality and forces you to change your game. Some people can adjust and just roll with it, but most people are never the same after a damaging loss (Hatton/Cotto, for example).
Most of type mental, fighters can usually physically recover, but sometimes, examples being Cotto and Vargas, it can be physical.
Rivera was no bum. Plus Vargas fought great in the Oscar fight. His back problems really messed him up later on in his career and thats why it was so spotty later on.
I think it's more mental than physical, but also a combination of the two. Meldrick Taylor lost to Chavez and was never the same. He still had the physical tools, but mentally he was never the same after that. It varies from fighter to fighter, hell some people even believe the true measure of a great fighter is how the respond after a loss, based on the very question your asking.
Absolutely. Consider David Price: He sounded level-headed and reflective in his post-fight interview. He seemed to realize that a single loss is no big deal, and could even make him better in the long run. However, talk is cheap. One of Price's main assets, IMO, is his WILLINGNESS to drive an opponent forward, and then attack with hard combos on the inside. Is he still going to still do that, when facing powerful punchers, or is he going to be gunshy of getting in there? Only time will tell.
On a sidenote, Foreman came back a much better fighter even after losses to Ali and Young. So who knows.