This strikes me as so true to Norman's character: aware of his descent into insanity, but not strong enough to stop it- perhaps because part of him condones those wants? It's beyond simply Norman wanting Harry; I like the eerie touch of his disturbance at his actions being, as you put, "welcomed, even craved", and realizing the implications of that. You've nicely cracked open his head and laid out the contents; I feel like both Norman and Harry are victims both of what Norman was before and is now and they're coping with it using the same, horrible method.

Damn, that was a nice bite of darkness to digest.