How about the book House of Leaves, by Mark Z. Danielewski? Also, some stories by Jorge Luis Borges, which was a big inspiration for House of Leaves, are kind of like this.

I'm really gonna have to have a look at Over The Edge... it's been on my radar since it first came out but I've never run across a copy in the flesh... and never got around to ordering a copy.
House of Leaves is on my 'want list'.
I'd also forgotten about Thomas Ligotti... he's got that same dream-like quality to a lot of his stories... kind of like a David Mamet of weird horror.

Over the weekend I watched another movie that kind of fit this kind of altered reality situation, though it doesn't seem localized, is Marebito... about a man who becomes fascinated by fear and goes seeking the 'ultimate terror'... eventually finding an underground world and bringing back one of its inhabitants.
It also might just be a movie about a man purposefully trying to drive himself insane.

What the fuck?

RPGPundit

Plainly, you're no fan of Japanese literature.  Even the good stuff is like this.

!i!