Once you start to encounter them, you will notice flaws, like why the hell cant they see you behind that crate.
Whole "you will go insane if you look at them" thing was just put in as an attempt to hide those mistakes.
And later, you will learn the pattern. Grab plot coupon, monster spawns, hide, wait until tense music stops, proceed. SH: Shattered Memories did this much better, you really feel that you cant hide anywhere (and you really cant, permanently anyway).