Thanks to one of our readers, who followed up on our recent 'insanity patent"? post to point out that Nintendo's 'Eternal Darkness Sanity's Requiem"? used an in-game sanity meter. The game was released in 2002; Nintendo's patent application was filed in 2000, which would have been when the game was in development.
GameSpot's review has good things to say about the sanity meter, so you can see why Nintendo wanted to get some protection for that feature.