I think that building anxiety/panic effects might be interesting if they are sufficiently modeled. You experience enough shit and never feels safe and don’t get enough sleep etc etc etc… eventually your nerves will get shot and you will go just a little bonkers, with or without mental illness. It would be interesting to track events that might ‘fray’ a person, and events that might relax them, and then stick in some thresholds for interesting effects, like:
Hearing/seeing things that aren’t there,
Screaming and attracting attention,
Reduced combat ability,
Inability to act for a turn(freezing),
Nightmares and poor sleep,
Increased fatigue
I am not sure I would call it sanity. I’d call it stress, or something along those lines. Stress in significant enough quantities can make a person behave in ways that a normal person might consider strange, paranoid, and irrational, but when you talk about ‘sanity’ vs ‘insanity’ it’s not the kind of thing a healthy person wafts in and out of on a day to day basis.
There was a thread about this a while ago. I like the idea of the game imposing some of the panic and fear and stress that the setting should imply. Even playing a sufficiently graphic zombie game can lead to some panicked situations and bad decisions that something like Cata cannot inflict upon the player due to its, uh… low graphical fidelity and turn-based gameplay. 
Enforcing a little potential for panic on the character, however, seems like a good method of bridging that context gap.
Aaaaalso It’d give us something to do with some of the medications that are in the game that currently only apply to people starting with certain flaws.
