She comments on how the nightmare numbed her senes looking at a corpse early in the game. Ny the end she regained her memories of being Alessa. Given these odds I found it more than a little strange that she would lose it.
She renamed herself back to Cheryl, I think it's safe to say that she wants to live on for Harry's sake. Although I still like to think that she looked to Douglas as a surrogate dad and vice versa. Heather says she wouldn't know what she'd do if he died and Douglas says she reminded him of his son.
Like Purr said, Heather had already commented (and made painfully evident via her actions and statements) that the nightmare had numbed her to the horrors she'd been encountering, and by the end of the game she'd already regained her memories as Alessa, so she wouldn't exactly have any reason to go insane /after/ the fact. She was joking around with Douglas with some rather black humor at the very last cutscene, which doesn't indicate a huge sanity slip.
Heather is a tough woman. There's no reason she'd go crazy when plenty of characters didn't either. Is she emotionally well balanced? Probably not, but that's understandable given what she goes through in SH3. (Yes, she uses black humor at the end, suggesting that she has coping mechanisms.)
Kurosawa wrote:I hope her fate remains unclear considering how bad things are going for the series.
I feared this comment....but the truth is light. I don't know what's going on with the series either. If there is a reboot, it's gonna take the power of something divine to truly reinforce that good old fashion SILENT HILL feel. Glad I became a member here years ago....we're a dying breed.....