This isn't one I take too seriously, but it was an itneresting 'what if' thought I had earlier.
For anyone who has read Saya no Uta this might make more sense.
Let's say Madotsuki wasn't originally a shut in, but one day she had a horrific accident akin to the one that happened to the main character of Saya.
Mado recovers, but some things just don't look right anymore - the shy girl down the street has grown multiple arms, her best friend has been replaced by some blob like monster.
She has no one to confide in, not even a 'Saya' to keep her sane, so she shuts her eyes tight and retreats to her house - what she can't see isn't real, perhaps.
She starts to resort to her dreams, and at first her dreams represent the world she once knew, but over time she starts to forget things - her mind starts representing people as the monsterous things she sees, corrupting her perfect dream world.
Eventually, her dreams are just as corrupt as her outside world. Realising that she'd rather brutally slaughter all these 'monsters' (knife effect) and maybe is even starting to derive pleasure from it, she finally jumps off her balcony so she doesn't become a monster herself.
/crazy, irrelevant theory
I just thought it was an interesting angle to look at the game through.