A mental patient with dire hallucinations is thrown into a drug euphoria which is supposed to help him battle his mental illness, by manifesting his deepest fears and most horrible hallucinations and making them into solid beings which would slowly shrink in front of him until they disappeared. However due to a severe cock-up in the Lab the hallucinations don't just shrink and leave, they try to kill the patient. If they succeed then the Patient becomes mentally broken and will be more insane than ever, but if the Patient succeeds then he begins the long path to rehabilitation.
Instead of a Health and Mana bar he has a Mental Health and Lucidity bar, Mental Health bar being a replacement for the Health bar and the Lucidity bar obviously being the mana bar, but the Lucidity bar runs out when you've manifested a few items and recharges over time. I will explain the manifesting bit in the following paragraph.
Seeing as it is the Patients fantasy he can, at some special areas, manifest weapons and items and even health upgrades and other such things. These Special areas are at the beginning, middle, and end of the realm. Basically you have 20 main fears and hallucinations to destroy, each with his own special power based on the fear or hallucination.
Along the way you are given several different types of weapons, ranging from melee swords and pikes and planks with nails in them to fully functioning grenade launchers and sub-machine guns, even weapons that haven't been invented before, such as a gun that sprays Medicine over the enemies, making them disappear, and a gun that fires syringes full of a knockout toxin. However when these weapons run out of ammo they simply vaporise, leaving the Patient to find new ones. As the game progresses the Patient becomes more lucid, being able to make better and more stable weapons in the special areas I mentioned earlier.
The leveld esign would be based upon the Patients different types of insanity, the Paranoia would obviously be a dark place full of eyes that constantly watch you, adding a stealth section or simply blowing the fuckers up before they see you, and the plain snooker-loopiness to an extremely bright and multi-coloured world full of strange avantguarde creatures intent on killing you in many imaginative ways. Each realm would be vastly different but in everyone is a sense of dark and twisted malevolence.
At the end of the game the patient has to destroy the insane side of himself, who looks like the patient but he wears a straightjacket, babbles incoherently, giggles insatiably and can manifest enemies and super weapons for himself at anytime during the fight. You have to destroy him by getting him down to a set amount of health, then running through a twisting labyrinth of corridors desperately trying to find the patients' ultimate fear.
The insane self is pursuing at your heels and is coated in a dark bullet and sword proof goo, if you go in the right direction then eventually you find the ultimate fear: A clown mask, you quickly put it on and then turn to face the Insane self, who screams and starts to flee, the goo dissolving. You have to reach him before he gets out of the labyrinth and brutally kill him with whatever weapon you find along the way.
That's just a rough idea but I think you guys get the picture ^^