I found it odd too, it was like "Kate" wanted to tell her story, but also didn't want to be involved whatsoever.Particularly odd since in her case, the psycho neighbour was actually dead. It seemed like she had written out what she wanted to say, and they got a hidden actress to read it.
"Kate" definitely sounds like she's paranoid. She came across as someone who was driven to the edge by her neighbour, and even now that it's over, she can't completely get over the fear and paranoia.
I also found the filming argument strange. "How dare you film me while I'm filming you!!" type of thing.
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