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.
The PCs traveling along the road/path/trail begin to hear a low droning sound. As they approach they find their path obstructed by hundred of thousands of droning insects. Locusts swarm though the air, feasting on the grass and plants. Passage will be slowed, but the insects pose no threat to the party, aside from being crunchy and disgusting underfoot, climbing into pouches and eating exposed food goods.