I finally finished Sanitarium for the first time in 12 years. I had played with my friend's copy 12 years ago and only played the first three chapters, wondering how it would have ended countless times.
Now that I've completed it I can't help being underwhelmed. This is clear that the designers wanted to make a game with the surreal atmosphere of Jacob's Ladder but without any of the writing skills and coherence to go with it. The first two chapters are the best parts of the game, and then it goes progressively downhill from there.
The whole Aztec stuff at the end was so annoying, you had to talk to so many people. And gosh isn't it funny that an Aztec God is forced to walk slowly and solve silly puzzles? The whole cyclops level wasn't much better either.
The game is so incoherent on so many levels, and there's tons of stuff that is never really explained at all. The game felt like a mish mash of different concepts for levels that didn't really had any cohesive link between them. Your character is so slow that the game artificially lasts twice as long because of it.
At the end Dr. Morgan became such a cheesy villain, I was laughing at him coming out of the shadows or whatever and trying to spook Max.

Agreed, the Aztec level was pretty "blah" overall. I also felt that the first half of the game was generally better developed than the latter half.
However, I certainly didn't get the impression that the game on the whole was incoherent. Sure, it leaves some things open to player interpretation, but I would hardly consider that a negative; considering the game basically revolves around escaping the confines of the main character's own mind, it's fitting that the narrative is more abstract and symbolic in its approach than your typical adventure fare.
I mean, you could pretty much reason out how each "dreamworld" you visited connected to the main character's psyche if you wanted to (except perhaps the aforementioned Aztec level. I couldn't quite figure that out). I could see how the game could potentially feel disjointed due to how weirdly different each world was (The horror themed first chapter is probably the most "normal" out of all of them. Then the game takes a serious turn for the bizarre), but I thought the ending did a well enough job of connecting everything together and making sense out of all the insanity.
I'll agree though that the character movement was extremely annoying at times. I was close to ripping my hair out at the underground maze. That entire chapter felt like one big chore.
Just my two cents.

http://www.gamasutra.com/view/feature/3299/postmortem_dreamforges_sanitarium.php
Open your eyes man, this game was just a bunch of unrelated ideas that the developers grasped at straws to link together.
The Aztec stuff was pure nonsense. How were they related to the cure to whatever infection hit children? The pretext to make an Aztec level and connection really showed and it felt really out of place.

I'm aware of the article in question. I'm not sure why you'd point out that particular statement while ignoring the rest; after all, a large chunk of good stories are just a mish mash of smaller good stories strung together. The catch, so to speak, is connecting these subplots into a streamlined narrative that ties it all together. Given its premise, this probably ended up working out even better for Sanitarium.
Obviously, we're divided on whether the developers actually managed to succeed, but to say that it was a "bunch of unrelated ideas that the developers grasped at straws to link together" is a bit of an overstatement. The Aztec angle? Sure, it's vague and not well developed at all. Is that enough to dismiss the game in its entirety? Hardly.
If we're quoting external sources, maybe take a look here? That was ONE player's interpretation of the story that I found pretty interesting. Mind you, all of this is pretty subjective, so take it with a grain of salt.
I'm curious, what specific parts of the game gave you the impression that the developers were just pulling random ideas out of a hat?

I thought the incoherence was part of the point. When you're weirded out by everything you see, and you're not always sure which elements of the game world are real and which ones are figments of your imagination that are "real" only to you, then you've got yourself a game in which a "coherent" plot would actually be a drawback. You're SUPPOSED to be confused; it's not like you're playing with a rational universe, where a universal set of rules links everything together. You're playing with the broken train of thought in a comatose man's head, which by its very nature is inconsistent, loops back on itself in odd ways, and may not ultimately lead anywhere.

I actually haven't finished it yet, because the endgame is so annoying. Thanks to the clunky navigation system, I keep stepping on black goo when I don't mean to, and literally going back to square one. And since the endgame isn't fun, I don't have much motivation to keep at it.
So perhaps my problems with the game all are resolved in the conclusion. Feel free to correct me if that's the case.
I personally think that the "it was all a dream/hallucination" trope is more compelling if the hallucinations reflect some important aspect of the character's psyche. So, to take some examples from movies: Hour of the Wolf's surreal sequence is about the main character's psychosexual insecurities; End of Evangelion's is about the main character's inability to relate to people; Eraserhead is about the main character's feelings towards fatherhood; etc.
That doesn't seem to be the case in much of this game. The end of the circus level was genuinely moving because of its connection to his sister, but the others lacked significance. The Aztec and graveyard levels didn't seem relevant at all. The first level started with a great atmosphere, and introduced the main character's drive to compensate for his sister's death by protecting children, but it devolved into utter silliness near the end.
I had fun during most of the game and thought it was good, but I doubt it's going to make my list of favorite adventure games once I finish.

Plenty of spoilers ahead. You've been warned.
My interpretation of the game was basically Max's mind clawing itself from the brink of death back to consciousness, in the process retreading the path that had brought him to trying and eventually succeeding in finding a cure for DNAV. The recurring theme of children being in danger stems from DNAV killing children, and this theme gets mixed with his sister's death being a driving force for him choosing to try to cure that particular disease. The asylum interludes seem to generally depict the figure of Morgan transitioning from a friend and colleague to an enemy, mirroring what occurred in reality. This theme was expressed acutely in the Grimwall level, although expressed through the influence of the Grimwall comics on Max's childhood. My take on the Aztec level was that from the reality flashbacks DNAV (or something similar) had actually struck Aztec society, and that was the direction of research Max had originally taken when trying to find a cure, and information he gained through that research was what eventually brought him to the insight that resulted in the cure (in one of the flashbacks he looks at a picture taken when he was looking into the Aztec angle, then exclaims "Of course!"). Overall I thought Sanitarium when taken as a whole managed to be remarkably coherent despite the abstract scenarios used to depict Max's mind piecing itself back together.

@shakantala
By black goo, are you referring to the underground maze in the Aztec level or the shadow Max segment in The Gauntlet (final chapter)? The underground maze was quite frustrating for me as well, but by that point, I was invested enough into the story to want to see how it all ended. I do think it's worth playing through to the end if only to see the game's ultimate resolution.
As for certain chapters lacking relevance, here are my own impressions:
As far as I could see, whereas the first two dreamworlds explore Max's motivations for becoming a doctor and wanting to help children, the latter two focus on Max's conflicts with Dr. Morgan and his endeavor to find the cure for DNAV.
The first dreamworld is pretty self-explanatory, with the overarching theme of Max wanting to protect the children. It didn't occur to me at first, but Mother seems to be a representation of Morgan's HOPE drug. As stated in the game, HOPE decelerates the growth of the DNAV disease, doubling the lifespan of affected children; however, this is not a true cure, just as Mother's method of transforming the children into plants is not a true cure for what she refers to as "the disease of meat".
The second dreamworld explores Max's past, demonstrating how his personal tragedy fueled his desire to become a doctor in order to help people.
The Hive chapter is an obvious parallel to Max and his "arch-nemesis" Morgan. Grimwall, the hero of the comic book that we see Max reading as a kid, is probably what Max aspires to be; a selfless heroic figure who fights to prevent a cataclysmic event that will claim many innocent lives. Gromna, the power-hungry traitor with a complete disregard for ethics (and we see the whole children motif again with the cyclops children), is most likely how Max perceives Dr. Morgan. The whole point of this chapter seemed to be to illustrate their contrasting views and rivalry in the context of a hyperbolic comic book scenario; it's a little out there, but I feel it works for the most part.
The Aztec chapter was the only dreamworld that I really struggled with. There's a reference to the Aztecs in one of the cutscenes where Max states something to the effect of the Aztecs having managed to survive a plague without the aid of modern medicine. Then you get another segment later on when Max seems to have an epiphany while looking at an old photo of an Aztec ruin; that's when the idea for the cure dawns upon him. It's definitely not explained all too well, and I can wholeheartedly agree that this is easily the weakest part of the game.
Sorry to ramble on and on, but having completed my first playthrough a mere week ago, I figure I might as well get it all out while the game's still fresh in my head.

I mean the Gauntlet. The navigation system isn't working for me at all here--Max keeps stepping in the wrong places.
Both of you have interesting theories about the Aztec level, but it still failed to engage me on an emotional level. I think its relationship to Max's psyche is a bit tenuous even if you're right.
Then there were the levels that were obviously relevant, but the execution of which seemed off to me. The cyclops level, for instance . . . yes, I see how the cyclops figure was important to Max, since he was the hero of a comic book that Max read while his sister was dying and he felt helpless. But I thought the actual level got bogged down in detail about the war between the cyclops/centaur people and the insects. I also thought that level looked ugly and didn't have very interesting puzzles, which detracted from my immersion in Max's consciousness.
Overall, I thought the game was good--but since I often see it listed as one of the best adventure or horror games ever, I think my expectations were too high.

I think the Aztec chapter gets pretty well explained by one of the dialogues between Quetzalcoatl and Olmec, if you talk to him before descending into the maze. I'm paraphrasing now, but Olmec asks Quetzalcoatl something along the lines of, "why are you doing this? The villagers looked up to you!"
The village, slaughtered by the dead king/god they once revered and worshipped, is a pretty obvious stand-in, to me at least, of Max's relationship with Morgan. (Made even more obvious by the fact that Quetzalcoatl is Morgan. IIRC you see Morgan transform into him before he disappears in the morgue & cemetery chapter.) Max and Morgan were obviously good friends and colleagues at one point--Max may have even looked up to him a bit, I think. Morgan later betrays that, as Max (very slowly) comes to realize through the Laboratory/The Hive chapters. The Aztec chapter is his finally coming to grips with the fact that Morgan is his enemy, not his friend, and is actually harming the people he was supposed to save (the children with DNAV and their families, represented by the village)--and having to confront that idea directly, by actually fighting Quetzalcoatl. (Which is what saves the chapter from being a bit redundant with "The Hive." Grimwall never directly confronts Gromna.)
I agree that how exactly Max found the cure for DNAV isn't adequately explained--it obviously has something to do with his Aztec research, and presumably the briefly mentioned "plague of Quetzalcoatl," but other than that...? No idea. I have to assume that DNAV and the Plague of Quetzalcoatl are either the same, or genetically similar enough that Max was somehow able to come up with a proper cure using the Aztec virus as a base.

Throughout the game, he's being injected with some kind of psychedelic drug. If you just take the scenarios as thoughts struggling to make way through a bad case of mushrooms and don't be expecting too much sense then you'll not be disappointed. It's a bit like the much older game Weird Dreams and that had no sense at all.
There's a flashback movie where he's shown collecting artefacts in South America, He has the basis of the cure sitting right in front of him and that's what he suddenly realises when he gets in the car and goes for a dive. That thought causes the psychedelic Aztec scene.
I would have done that area differently, but then again I have never made a AAA commercial game :-)

I agree, I played through a pirated copy because at that time I couldn't find a legit version. I liked it so much that when I saw it on gog I snapped it up. Bugs aside, it's a really gripping game, the first time I played it, I was pretty much only playing it.
My main gripe is that the game is too short, I played through it in like 2 days, but I found the whole thing to be quite well thought out and compelling. But then again, I didn't spend a lot of time nitpicking the game play choices.

SPOILERS !
I just finished the game a few minutes ago and I think it's amazing, one of the most mature games I've played (I'm tired of seeing games labelled as "mature" only because of blood and guts). It is twisted, shocking (the game was banned in France because of the chapter where you have to dig out a dead child) sometimes funny, sad and hopeful at the same time... I don't think the story lacks coherence : it is just the inner battle of a dying man in his own purgatory, which explains all the silly things happening which are related to past events and memories. I'm glad to see that I'm not the only one who found the whole Aztec episode a bit boring... However, I really liked the Cyclope episode : actually, I think it could have been a game by itself ! I mean, Cyclopes fighting blood-sucking cybertenically-enhanced bugs in an oddly futuristic universe ? What the f*** ?! However I was a bit disappointed by the lack of action in this level : action sequences are really rare in this game (it's an adventure game after all) but since you play as a Cyclope superhero, it could have been fun to squash some cyberbugs with the sledgehammer (I thought it was its purpose at the beginning).
Oh yeah, I also loved the reference to Neil Young's "My My, Hey Hey (Out Of The Blue)" when Max says, after defeating the "pumpkin boss" in the second chapter : "I guess he thought it was better to burn out than to fade away" :)
Anyway, awesome game, maybe I'll add a review !

The best part is when the Cyclops says "grap!"