Everyone is playing with his mind, he is not insane, he was a "normal" guy until they started to fuck with his mind, killing people, then he find out that they aren't dead, someone lying to him saying kill this person, then he find out that he was used. In some moment they say that Grace put drugs in the MC's food and drinks to make him have those dreams and see things, like when Grace killed Stacy. So he is not insane, maybe they are trying to make him believe that he is insane but still that doesn't explain those holes because he is not really insane, he is well aware of everything even when he don't understand what is happening. But lets say that those plot holes are because he is insane, the insane thing doesn't work with Sal's story, he is not insane, and when you play with him, there are some plot holes too. And I found it a little disappointing that the you can choose to not trust Sandy, because is clearly that she was up to something, but when the MC believe that Paige is dead he trust her without doubt even over Grace, what to me, makes no sense because the MC did all that just to find her and without thinking he trust Sandy and kill her.