I was confused by the disorienting camera work, sudden jump-cuts and odd lighting choices. Such amateur things from Scorsese of all people? Halfway through I realized our perspective character was suffering from migraines. How do those manifest? Disorientation, noise and light sensitivity. When they were bad, the picture was bad. Realizing that really let me enjoy the movie, and it's about the only thing I'll forewarn about when I recommend the movie.
As a migraine sufferer, that bit of the movie ended up being the single most accurate portrayal of a mental phenomenon I've ever seen in any movie. The only significant difference between what is shown in the movie and what I experience, along with a portion of other migraine sufferers, is the lack of "auras". But migraines often present without them.
After spending most of the movie thinking to myself 'not another shaggy dog tale' I realised the movie was well aware of the shaggy dog nature of 'protagonist is dreaming/insane' stories, and contains at least one reference to it in the 'tag, you're it!' line.==Pistolero
The reason the nurses are so rude to Teddy is because they know he's crazy, and have heard this all before.
The first person they meet in Ward C, a guard, tells them that, even though most inmates are back in the cells (after the power failure)... some may still be roaming, and warns them not to try and capture them alone, 'cause these guys will kill them. And then he friggin' leaves. Cackling like a lunatic. It seemed weird to me that this guy would take so lightly what is clearly an emergency situation. Also, what was with the unsettling cackling? My first thought: he's just messing with the two noobies (they're dressed as orderlies). My second thought: he's actually an inmate who managed to steal a guard outfit, which is worrying to say the least. Turns out it's neither, but the explanation is even creepier: he just finds the situation amusing because he's aware that this is all a set up scenario for schizophrenic "Teddy" to play detective.
The entire story is littered with clues that Teddy is actually Andrew Laeddis, and has been a patient on the island for two years. Here are some of the more obvious ones:
The very first we see of Teddy is him throwing up on the ferry. He continues to suffer increasingly troubling symptoms throughout the film, including nightmares, hallucinations, and tremors, all of which seem to point to foul play on the part of the hospital staff, since they've been giving him pills. Turns out the reason he's experiencing all these symptoms is because they're not giving him anything and he's been going through withdrawal.
His very first line is "pull yourself together, Teddy." This is quite meaningful in retrospect, as he is struggling to keep the Teddy Daniels persona together while surrounded by water, which reminds him of his true nature.
When Teddy notes that the guards seem nervous, their escort remarks: "Today, Marshal, we all are." On the first viewing, he appears to be talking about the lost patient, but is actually referring to the fact that they're basically giving Andrew, their single most dangerous patient, free run of the facility.
Teddy imediately knows that the fences in the place are eletrified.
One of the first patients Teddy sees out in the garden waves to him and laughs. At first this may be dismissed as the man's insanity causing inexplicable behavior. But if you think about it, of course he would be amused when he sees a fellow patient walking into the hospital dressed as a U.S. Marshall.
The guards who were supposed to be looking for Rachel Solando are shown sitting idly on the rocks next to the sea, smoking, and overall not doing their jobs.
When the head of security asks the Marshals to hand over their firearms, Chuck struggles to get his gun out of the holster, which seems an odd thing for a Federal Marshal to have trouble with. That's because he's not a Marshal at all, but Andrew's primary psychiatrist, Dr. Sheehan.
When interviewing the nurse, she says that Dr. Sheehan was present at group therapy. Almost immediately when she mentions him, she begins to glance over at Chuck a few times, because he is Dr. Sheehan.
Later in the interview she mentions that Dr. Sheehan is "easy on the eyes". We get a shot of Chuck/Sheehan's amused reaction.
Also significant in retrospect are some of the jokes the nurses tell, which seemingly get more laughter than warranted. One of them mentions that Rachel Solondo always complained about the food there. She was actually talking about Teddy/Andrew. Another nurse, after being asked why Dr. Sheehan gets so much vacation time, quips "Of course! He's a doctor!" This is so funny to them because Dr. Sheehan, a.k.a. "Chuck", is in the room at the time.
When Teddy moves on to interviewing individual patients, he notices that they talk as though they were coached, and all of them mysteriously shut down when he asks them about Andrew Laeddis. One of them even writes him a note telling him to run. The audience is led to believe that this is because something sinister is going on at the hospital, but it's actually because they don't want him to find out that he is Andrew Laeddis until much later.
And she does make sure to ask Chuck, pardon, "Teddy's" psychiatrist, for a glass of water, so he will get up and not see the note. If they were both federal agents, there would have been no reason for trusting only one of them, as she appears to do.
With one of the patients, Teddy asks her whether she'd ever heard of an Andrew Laeddis. Her reaction appears oddly emotional, which at the time we assume to be because of her nervousness of spilling the beans, but she is actually upset because the real Andrew is talking to her, and he has no idea.
Many of Teddy's memories of the war are likely combinations of what really happened and of the event he doesn't want to remember.
Slightly more subtle, but on the first viewing Chuck's character comes across as crudely written/acted hardboiled law enforcement officer, complete with cussing and a "know nothing" attitude. Brilliant as we later find out that "Chuck" Lester Sheehan, who is playing the stereotypical role as much as the actor.
When Teddy asks a patient about Dr. Sheehan, she becomes nervous. This is because Dr. Sheehan, who is pretending to be Chuck, is sitting right next to Teddy. The patient often glances at "Chuck" when coming up with answers, and makes sure to only say good things about Sheehan.
Teddy seems to trust Chuck awfully quickly, considering they only met on the ferry, even to the point where when questioned by an inmate he insists that he does. When you realise that Chuck is actually Laeddis's psychiatrist who he has been seeing for 2 years, this trust becomes indicative of their relationship over that time.
When confronted by the first patient he and Chuck interviewed, Teddy starts rubbing his pencil into the paper of his notebook, creating a squeaking sound, annoying him more and more until the patient cracks. When it's revealed that he's actually been a patient there for 2 years, and that he would probably know the patient they interviewed, it becomes conceivable that this unique way of getting under the interviewee's skin arose from Laeddis's subconscious knowledge of the patient and what would annoy him.
Teddy's true identity also explains the disapproving and impatient look he gets from an orderly after the patient freaks out.
When that first patient is being escorted from the interview by a band of orderlies after being aroused, he is hollering/mumbling, "I don't see Laeddiss in that. I don't see him anymore." It was presented right on the table and could still be chalked up as a madman's rambling rather than a fellow patient's, maybe friend's, frustration at his futile attempt to help.
One scene has Cawley refer to Rachel in past tense to describe her escape, and Teddy asks him why he does that. He responds with: "Why do you think?" He is really referring to Dolores, the real life version of Rachel, who is dead.
When one inmate Daniels is interviewing asks for a cup of water, Chuck complies. In subsequent cuts the glass is there when Chuck is in frame but doesn't exist when he is not, showing Chuck isn't actually Chuck.
Subtler: the first time Daniels dreams about his wife, she is burning, then bleeding from the stomach, then both.
Even more subtle: Teddy meets, or thinks he meets, the real Rachel Solando in the cave. If she's not a hallucination or a fake, she would have had no way of knowing that the U.S. Marshals had been called in to look for her, so why does she call him "Marshal" before he says anything about what he's doing there?
When Teddy has an episode, Crawley tries to offer him some medicine. He sounds like a doctor trying to cajole an uncooperative, rather childish, patient into taking his meds, rather a newly-made professional acquaintance making a helpful gesture.
The Warden has a seemingly Big Lipped Alligator Moment while driving Teddy back to the asylum, in which he describes himself and Teddy as "men of violence", and generally just acts menacing. This is the warden's only dialogue scene. It makes perfect sense when you understand his motives and Teddy's situation: the warden is subtly encouraging Andrew Laeddis to snap and attack someone, thereby ensuring a lobotomy.
At the end of the movie it's implied that Andrew has regressed to his "Teddy Daniels" persona again and has to go through with the operation, but it's equally possible that he's intentionally pretending to have regressed in order to force them to lobotomize him — once that's done, he can forget everything forever.
It's hard to tell what was intentionally being implied, but I think it's definitely true that he had not forgotten but consciously chose "dying as a good man" as Teddy Daniels instead of "living as a monster" as Andrew Laeddis.
On the other hand, it could have been an unconscious decision - as Dr. Cawley said, "sanity is not a choice". The "good man" statement could have just been a manifestation of subconscious turmoil.
In the original book, he regresses back to Teddy the next morning, and it'll be Teddy going into the operating room.
When Dr. Cawley is introduced, he speaks about how he dislikes modern treatments of patients, of just giving them medication or lobotomizing them (seeing these as last resorts at best) and instead wants to cure them. First it comes off as sounding pompous, but is actually the whole reason he did everything we saw.
Teddy/Andrew erronously says to Chuck/Sheehan "My home is Rachel".
During the flashback shower scene Dolores implies she and Teddy have a child which you later realize is the truth with Andrew with Rachel.