In my fourth year of my PhD on schizophrenia and I'm currently writing up my thesis. I'm procrastinating right now so thought I'd do something useful with what I've been studying.
And no, schizophrenia is not multiple personality disorder.
Edit: I have to get dinner and run some errands. I'm really enjoying this so I will definitely get back and answer the rest of the questions.
Thank you for the essay! I wouldn't have asked if I wasn't curious.
My interpretation of the "tickle study" was that the brain has a function which tells it whether or not a signal is coming from inside the brain or outside. That is, hearing a song makes us think of it, but so does remembering a song. The same part of the brain lights up, and this "inside/outside" function reminds us whether or not the sensation from hearing/remembering that song is from recollection or perception. I imagined schizophrenics as having that function diminished or absent, and the result is that they perceive part or all of their own thought processes as actual images or voices.
It's likely much more complicated than that, but that explanation appeals to be because it's so easy to look at someone experiencing hallucinations as "totally crazy," when it's actually just the result of one function among many which doesn't work properly. It reminds me that there's a mostly-functional human just beneath the psychosis, who needs help and understanding.
Your interpretation is mostly correct, in that sensory attenuation helps to distinguish between sensory experiences as coming from the inside or outside, and that schizophrenics show a deficit in that part.
And I couldnt agree with your last part more. I talk with people with schizophrenia and it's heartbreaking to hear of their life stories. They all had hopes and dreams and most were just entering the world after school (since onset is normally during young adult years). It's sad to hear how much the illness derailed their life.