About the negative Purity / mind-break: I agree that from a pure logic standpoint, you can't just keep getting fucked silly over and over again and then be on your merry way like nothing happened. Also, if you look at your typical eroge, they all have some sort of "bad end" if you fail to meet the original objective of the game. Here, you're given the task of saving a Princess and getting a shitload of money in return - so if you decide halfway that the Dark Side is the way to go for you, you should reach a "bad end". Bear in mind though, that "bad end" doesn't necessarily mean crappy end - for those of you who've played Bible Black, the ending "Evil Never Dies" is considered a "bad end", but in terms of scene, it's probably the one that rocks the most
If you want to implement a fairly simple solution for now, how about: if your Purity hits 0 or less, when you reach the final boss, you only have one option, i.e. submitting (putting the "Game Over" back in GOR, so to speak).
For a somewhat more satisfying approach to mind-break, you should draw some inspiration from The Call of Cthulhu table-top RPG and its rules on Sanity -
http://www.chaosium.com/forms/coc_quick_start_color.pdf can give you a very simple overview of how it works (you'd need the full rulebook for all the details, if you're interested I can probably dig it up - still, check page 9 for the basic rules on Sanity, and page 18 for the small paragraph on Temporary Insanity).
I don't know how many people share Lucky's goal of becoming a member of the Syndicate, nor if it's even the direction Kitamaru wants to take his game. If it *is* an option though, then I'd suggest something like this: if your Purity is at 0 or lower when you reach a boss (it has to be at keypoints in the game, and not just at some random encounter), you have the option to say you want to join the Syndicate's side. But because they won't just accept anyone, you still have to fight the boss - to prove your skills. Lose, and it's off to the Chambers with you, you just aren't good enough. Win, and now that you've proven your fighting skils, you have to prove your allegiance... with your body. H-scene with the boss for your hard efforts, yay! With that done though, I don't know how the rest of the game would develop - because you're clearly not looking for the Princess anymore at this point. Perhaps the Syndicate reassigns your priorities, and gives you the order to hunt down whichever male NPC good guy, like Orpheus, is roaming around in the Labyrinth? That guy would then become your "final boss" or something, I guess.