To me Henry seemed to be like the most calm kind of character in a Silent Hill game....... Maybe just because he didn't talk as much as past characters...
There are no sanity effect type things, it's just as time goes on the spirits start to invade your apartment... And it didn't seem like we were delving deeper into his mind to me... Infact to me for awhile I thought maybe he wasn't in his own mind or body or something (in the beginning of the game if you look at the TV he's like "Wait... didn't I have a record player here?" and other weird stuff as the game progresses... I had so many theories running through my head as the game went on it was great...
As for the doll, I took it to... what it does is if you stick it in your chest at home, it creates a few different kind of spirits that invade your house... apparently...
You say everyone took it, but BLueFire didn't... he's the smart one here...
And I second that most unique monsters/enemies comment...