'if' he is schizophrenic....
why are we given such insight into peter's life? we witness his interactions with his family, coworkers, conspirators, etc. the movie put a lot of focus on peter's life and personality that filmmakers don't usually bother with when they want to suggest such manifestation. these films usually involve the schizo in the scene with their manifestation at all times as it's rare for someone who suffers from this disorder to actually experience such a detailed observation of their hallucinations and the subsequent emotions he/she would experience. not to mention that i just didn't pick any hints or anything from the director that pointed at the "plotline cure-all" of schizophrenia or even insanity. i think he was obsessed to an unhealthy level, but not insane.
i think it was fairly obvious that the director designed everything in the film to lead you to a conclusion that harry killed peter and it resulted in another cover up. peter was a loose cannon anyway and quickly heading towards cracking.
i thought that the cutscenes in his head were a pretty clear indication, not of his insanity, but of his impending 'breaking point'. i thought the red motif was hinting at his rage and the face struggling to break through the latex-like matter was simply his murderous rage trying to break through his morals and his opinion that he isn't a murderer. in the end, it won him over and he "entered the darkness" to take care of peter.
if this WAS another in a handful of 'schizo' films, it was really poorly done. if not- it was pretty decent- and had a good ending that, while interesting, didn't really leave me questioning much. as always, turturro was amazing- so i have that much.