Is that "note to you" right in the beginning of the game written by David?

There's a busted railing. Snap off one of the bars.

So was it a Shutter Island? Like, all in David's head cause hes looney, or what?

David was married to Gracie. Gracie developed, or already had 2 different personalities. Gracie did something (most likely a murder) which led to her being sent to the Asylum that the game is based in. David constantly visited her while she was in there. As a result, he learned about her case from her doctor, (Patrick, I think? I can't exactly remember).

Eventually, David stopped coming, possibly because of Gracie's doctor's orders. Gracie's darker personality started becoming more evident, and that was when Sophie came into the picture. Sophie nurtured Gracie's darker side, and this became the dominant personality.

What happened next is a bit blank for me, but I'm gonna guess and say eventually, David did visit again.When he did, he saw how spiteful she was towards him. Big blank here, then David was captured by Sophie, who did something to David to cause him to lose his memory/ gain a different recollection of his memories.

Chances are that last part is way off, but that's all I could gather. For all I know, everything was indeed a big mind freak, where nothing happened at all, so don't flame me if I was way off.

Edit: Oh, there may have been something about Gracie and David joining as one person together through Sophie's meddling, which would explain why you're her "experiment" and why you have two different 'worlds' at certain parts, plus the memories, but that's just speculation on my behalf. I'm more than likely wrong.

I know what the password is, but what do I need it for and where can I enter the password?

There is a door at the end of one of the hallways (near where you find the tape), there's a giant panel there, you can't see it without your flashlight because it's too dark, funny 'cause it's freaking huge.