Yes, absolutely. And while we're on environment effects, I would also love to see more creative insanity effects in general (if there's going to be any insanity mechanic at all). I mean in TDD the main effect was that your vision went all blurry and wobbly, which I'd associate more with being drunk than insane
The bugs on your face were a nice idea I think, I'd like to see more in that direction.
I remember "Eternal Darkness" on the Gamecube having some interesting insanity effects (not counting the ones that shattered the fourth wall, I don't think that would fit a game like Amnesia), like you'd walk into a room and immediately get killed, only to suddenly be back in the room you came from because it was all in your head. Or you'd walk out a door into the same room you came from. Or suddenly your characters HEAD WOULD EXPLODE! Ok, maybe that last one wasn't such a great idea.