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.
A great treasure has been stolen from the Palace and taken to the nearby Temple to the Bitch-Goddess Atrath Klee. The King demands that the party go and retrieve it - the only snag is that the Temple is guarded by potent magic that will kill any male who steps inside. It's just as well that the King has a stash of Girdles of Gender Alteration for just this circumstance.