"I’ve always thought that the psychogenic fugue kicks in when Fred becomes Pete, prior to that we have a mix of reality and Fred’s increasing murderous jealousy - represented by Mystery Man ‘invading’ his normal existence."
I guess that's one area we see it differently. I see the film opening with Fred already in the fugue. He hears himself buzz in a message, he meets this supernatural-type Mystery Man at a party, etc. Seems like we aren't suppose to take these things at face value (i.e.,as reality), but come to realize later that it's all in his head. When he dives into the Pete character, he is just diving deeper -- desperately trying to "remember things his own way, not necessarily the way they happened."
As for the cops I suppose one could just write that off as Fred's mind dealing with the paranoia of having the cops always on his tail, that is, having then catch up to him at one point after having murdered his wife.
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