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 road has never been more than an overgrown mud track, little travelled and little cared for, petered out to nothing more than a flattened earthen line, barely distinguishable from the rest of the landscape. The soil is dark and fecund and dark oaks stand like sentinels at the forest edge, their branches high and leafy. From them hang grizzly human bones, skulls and shiny precious stones. Who put these strange totems there? Are they warnings? Do the PCs dare to take the stones?