Does long-term alcohol use permanently change one's thought processes? Is long-term alcohol use really capable of permanently changing one's thought processes?  

In what ways is this possible, and through what physical changes in the brain does this occur?
I am only addressing the  extreme end of the spectrum of chronic alcohol abuse:
One syndrome that is known to develop from chronic alcohol abuse id Korsakoff's syndrome or Wernicke-Korsakoff syndrome.
It causes memory loss and a form of dementia. An irreversible brain damage that permanently disables the individual. The individual is unable to function within society and carry out the daily tasks necessary for functional living. It can also include psychosis.


  Korsakoff syndrome is most commonly caused by alcohol misuse,...//...
  
  Korsakoff syndrome causes problems learning new information, inability
  to remember recent events and long-term memory gaps. Memory problems
  may be strikingly severe while other thinking and social skills are
  relatively unaffected. For example, individuals may seem able to carry
  on a coherent conversation, but moments later be unable to recall that
  the conversation took place or to whom they spoke.
  
  Those with Korsakoff syndrome may "confabulate," or make up,
  information they can't remember. They are not "lying" but may actually
  believe their invented explanations. Scientists don't yet understand
  why Korsakoff syndrome may cause confabulation. (1)
  ....
  Scientists don't yet know exactly how Korsakoff syndrome damages the
  brain. Research has shown that severe thiamine deficiency disrupts
  several biochemicals that play key roles in carrying signals among
  brain cells and in storing and retrieving memories. These disruptions
  destroy brain cells and cause widespread microscopic bleeding and scar
  tissue. (1)


....


  Lack of vitamin B1 is common in people with alcoholism....//..
  Korsakoff syndrome, or Korsakoff psychosis, tends to develop as
  Wernicke symptoms go away. Wernicke encephalopathy causes brain damage
  in lower parts of the brain called the thalamus and hypothalamus.
  Korsakoff psychosis results from permanent damage to areas of the
  brain involved with memory.   (2)
  ....
   Symptoms of Wernicke encephalopathy include:
  - Confusion and loss of mental activity that can progress to coma and
  death
   - Loss of muscle coordination (ataxia) that can cause leg tremor
  -  Vision changes such as abnormal eye movements (back and forth
  movements called nystagmus), double vision, eyelid drooping
  Alcohol withdrawal Symptoms of Korsakoff syndrome:
  -  Inability to form new memories
  -  Loss of memory, can be severe
  -   Making up
  stories (confabulation)
  - Seeing or hearing things that are not really there (hallucinations) (2)


 (1) Korsakoff Syndrome
Alzheimer's Association
(2) A.D.A.M. Medical Encyclopedia.
Wernicke-Korsakoff syndrome
Korsakoff psychosis; Alcoholic encephalopathy; Encephalopathy - alcoholic; Wernicke's disease
Last reviewed: February 27, 2013.