So, I'm building a campaign around the idea of mental illness slowly creeping in and changing your view of yourself, as well as reality, without you knowing it.

I'm trying to work on a mechanic that would involve an item (which holds the sickness/curse/affliction) being picked up by the players as some loot (bait-and-switch with an easier fight with that as a prize), stored in a pocket, and then having it dissolve or fuse into their skin, with certain stipulations to fully remove the 'infection'. Restorations, remove curse, and all of those types of spells would bounce back and do nothing.
They would have to figure out the loot mechanic, what to do to heal it, who built the objects, why they were in the players' paths, etc. I don't want to structure it fully as a curse, but also don't want to make it an illness. Would any of y'all have an idea of how to meld this idea together?

I wanted to have each item the group gets (5 ppl) to have a mental health symptom that attaches to the player to begin with. I was going to structure this as the 'seed symptoms' that would reflect the PC fears/issues, with the players experiencing more and more symptoms as the campaign rolls on, ending with everyone (if the dice allows it) battling different strengths of ALL mental illness symptoms (accumulation, but seed symptom is specific to the character in the beginning and the worst to overcome.)

First, mental health is a pretty difficult and nuanced topic. Please make sure to talk with your players about it. You never know if they or one of their loved ones deals with these issues, and you don’t want to belittle what they go through. 

But, assuming everyone is on board and such. I’m still not sure how you do would this. For one, there should at least be a save to resist it. And even then, it seems like you end up forcing personality traits on the PCs. “Bill, your character is now afraid of spiders. Sarah, your character has [condition] so now play your character like that. Here’s the Wikipedia page that describes these aspects of your new personality.” I know as a player, I’d not want that. It’s different when it’s something like a cursed item — there’s a clear cause, a limited impact on the character’s personality, and the solution is pretty straightforward. But this nigh incurable thing with no clear cause is pretty rough. It’s basically just DM fiat that the character changes their personality. 

Thank you for the feedback! I already confirmed with players about the topics and all are on board. SO important to check those things before a game

This is a fantastic point you make about the forced changes; I think setting the scene to effect their perception of reality versus their behavior might be a better aim.
The mechanic I was aiming for was less behavior and more stimuli. I wanted to structure it like visual hallucinations/visions/voices/object/scenery that would target the characters flaws/personal strife, with the object being the catalyst. The gameplay was going to be more "How would this situation or lack of information effect your character and their mission?" I can't control their behaviors or moods, but I can tailor the hallucinations to effect characters in ways that would detriment them as adventurers. Example: Seeing past foes, voices from their families or friends, terrain that doesn't exist, spell effects that aren't real

I've been thinking up a fear sub-system for 5e that tries to straddle the powerlessness of being afraid with player agency. One option is to use carrots, not sticks. Have the players define their characters' fears (see "Seeds of Fear" from VRGtR). Then when confronted with these fears, offer the players inspiration if they act on their fears.

Ooooooo, that’s rad as hell. And thank you for the Seeds of Fear suggestion!