RE: The Note
If the disjointedness is intentional, and you're looking to make it seem like the rants and raves of someone who isn't in their right mind, then might I suggest the use of excessive ellipses, and almost a more inner-monologue style of writing. That way it comes across as more unhinged-stream-of-consciousness and less of a planned nature. 🙂
RE: The Knife
Totally an interesting idea about the double-edged sword. Just think if that's the mechanic you want to go with, you'll definitely want a quick pop-up explaining that light comes at a price. And again, that HP items might need to be a bit more plentiful.
RE: Possession
Since it is separate, an additional bar would be good. As far as I could tell my HP was going down as I was looking at The Rot, but not touching it, so this is perhaps a bug? But yes, maybe next to or above the heart icon for HP you could do a brain one for Possession level.
I really do think it's a solid game though, and with enough time and effort you could release it to the horror world--even if just on itch.io. Steam would be awesome too, but I know plenty of horror content creators who scour itch.io as well for good horror games.