That and since asylums are full of people who already have a loose grip on reality with demons being generated by their minds and following them around and such like, the addition of Adam who is probably the focus of a lot of supernatural activity and interest could act like a trigger to the tinderbox environment that is the asylum, causing it to erupt with supernatural power even without a deliberate force acting behind it. If we presume there are still secret factions at work in the game world as well, perhaps ones who were trying to manipulate the events in the first game for their own benefit perhaps, then it gives the possibility of the game leading onto more adventures after he gets out the asylum too.

As to using new characters instead, it would be sidestepping the issue though if done right I could see it working, perhaps with Adam disappearing and the new character having to track him down to find out what happened and where he's gone. Or maybe a prequel, set in like the 1920s or something where some of the events from the first game are set up and explained. Though prequels do tend to suck to be honest. ;)