Originally, the main character was an ostrich suffering from mental imbalance and multiple personalities. Tim Schafer killed the idea because he strongly believes in games being “wish fulfillments,” guessing that not many people fantasize about being an insane ostrich. Raz was originally named Dart and it had many different design before the final one. Even the Censors were different, with a more “green monsters” look. The HUD, the Menù, the Psi Challenge Markers and the Telekinesis style were changed too. Some “brains” were in different positions in the beta version, as the one at the top of the wall in front of the asylum. The Milla’s Lab does not exist in the final game.
Tim Schafer first conceived the idea for Psychonauts while working on Full Throttle, which originally was to have an interactive peyote trip sequence. The idea was deemed unsuitable for a family-friendly game, but it led to Schafer’s desire to do a game featuring psychological trips or interactive dream sequences. – [Info from Wikipedia]