As discussed under 1 Nephi 14:2, the critical text will maintain the modern spelling blessed. The original spelling blest shows that the scribes and Joseph Smith himself probably pronounced the word as /blest/, which is also how it would be pronounced in modern English. In this particular passage, Joseph himself made the spelling correction from blest to blessed in his editing for the 1837 edition.
The conjunctive combination of blessed and prospered seems to be saying that “they were blessed and [they were] prospered in the land”; what we expect in modern English is “they were blessed and [they] prospered in the land” (which is actually one way to interpret this conjunctive combination). The intransitive use of the verb prosper dominates the text (with 55 occurrences), as in the well-used phraseology “inasmuch as thy seed shall keep my commandments / they shall prosper in the land of promise” (1 Nephi 4:14). But the text also has 15 instances of the transitive use of the verb prosper, including six others that are conjoined with the verb bless:
This transitive use of prosper is also found in the King James Bible, as in these examples:
For every one of the six other Book of Mormon conjunctive uses of bless and prosper, the verb prosper is clearly transitive. Thus in Mosiah 25:24 the verb prosper should probably be interpreted as a transitive verb (“they were blessed and [they were] prospered in the land”).
Summary: Retain the spelling blessed in Mosiah 25:24 (and elsewhere in the text); the verb prosper is frequently used as a transitive verb in the Book of Mormon text, including here in this passage when it is combined with blessed.