Why is there so much significance attached to the pills which Adam is suposed to take in I am the Cheese? What is their purpose?
Because Adam is delusional (and we know to be an unreliable narrator), it is very important to him that he make the "journey" without aid or crutches, which is how he views the pills.
Later, as we discover that Adam/Paul has never actually left the hospital grounds, we can assume that the pills are what Dr. Dupont administers to him when his conversations with Brint get too difficult.
In answer to your questions, I don't think the pills make him insane; I believe his growth has been arrested due to the trauma he has suffered at seeing his parents killed before his eyes.