I'm glad you like the idea! I appreciate the detailed feedback.
Controls: Moving around with the mouse sounds like it could definitely work, especially if it moves around the room itself. With controller support, this would be implemented with the right joystick which would make sense.
Gameplay: You're not the only one :) I would tune down the difficulty in the first level and gradually increase the intensity as the timer increases. Switching the perspective or camera view increases the sanity if you stayed too long in the same perspective! Anyways, I think there is definitely room for improvement in the feedback so that the player understands what is going on better/easier.
Thanks for playing!