A standard roleplaying environment: the tavern. This is another easy one to create in your own home, providing you have a large enough group of roleplaying friends. Let us assume your PC group is no larger than five, and that the rest of your friends can be NPCs. Let us also aim for an exceptionally seedy and unscrupulous city tavern.
In a good LARP it is desirable to separate the players out individually at some stage, because they are more suggestible and afraid when they are alone. Some form of individual challenge is probably the best way of doing this. One possible setting for this is a cave system, and it is probably one of the easiest to recreate realistically, and one of the most perfect for playing on fears of claustrophobia and darkness.
Idea from the Aeneid. Could make an intriguing encounter when searching for firewood..."Quite near there happened to be a mound of earth, at the highest part of which were growing thickets of cornel and a dense cluster of spiky myrtle-stems. I went up there and tried to wrench the green growth from the ground to provide a leafy covering for our altar. There I was confronted by a horrible and astounding miracle. For from the first bush which I tried to break off...blood oozed in dark drops, fouling the earth with its spots...A piteous moan came from the base of the mound and I heard a human voice answering me: 'Why, Aeneas, must you rend a poor sufferer? I am buried here...for I am Polydorus. Here death overpowered me in a crop of piercing iron-pointed spears. And so a crop resembling javelins has grown over me...'"