The foundations are good, but...
Did you playtest this game to completion? I don't mean to sound like a dick, it's an honest question. It seems that nearly every aspect of this game was thought of with detail, but not executed properly.
Firstly, the melee combat: it looks like you used a hitscan attack with a distance check. That wouldn't be too bad, Half-Life uses it for example, except the melee combat does not lend itself to that type of attack. Each weapon is slow and lumbering, and each one has a long windup and cool down, but that wait is not answered with a powerful enough attack. If it did more damage to the grunts, or if it had a wider hurtbox, it would be more satisfying to use. As it is, it just serves to make the player feel powerless.
Next, the guns: not bad. You shoot, and a bullet comes out. From what I saw, there were a couple types, but the player mostly gets to use the pistol. For a madness game, only getting 4 levels with access to guns feels extremely underwhelming. I mean, this is madness, the series where the only thing more abundant than guns were the bullets they fired.
Now, the enemies: this is where most of the critique comes in. They are stronger than you, they are faster than you, and due to the weird melee hitscan, they are far more accurate than you. This alone, while seeming bad, isn't actually enough to be a problem. Where it becomes an issue, is that they have the same amount of health as you, and are slightly broken with their offence/defense. The player gets two actions: attack and block (kicking and throwing did next to no damage, and with one barely having knockback, and the other leaving you defenseless, I don't count these as useful actions). In contrast, the enemy has two more powerful options: lunge and dodge. I'll get back to those in a bit, but with both of those options, as well as the overpowered nature of the previous few things and also the fact that they are rarely if ever alone, just ends up feeling unfair.
On the other side of the coin, the player: almost powerless. The first level, you get a knife and face off against one grunt. On my first playthrough, I didn't see the knife (more on that later) and I learned very quickly that I could not punch. So I died. It feels weird that I had no offensive options without a weapon, namely, punching the ever-loving shit out of him. With most games, being out of ammo gives you at least the option of a weak but unlimited backup, and with durability mechanic in this game, melee weapons wouldn't cut it. So, I tried again except by kicking him to death. I managed to do it in almost an entire minute of holding the S key and getting lucky. Only then did I notice the knife. The next level, I grabbed a pipe stuck in a wall and spent nearly 5 minutes trying to kill every guy in my way. That's when I noticed that melee weapons hardly worked on them, taking four hits to kill them. It took them the same for me, but they had the advantage in numbers, so I kept dying. I eventually just ran past them, a method that works for all but the boss level. Then, I got the shotgun. It was good, but I learned that reloading didn't actually exist. That could make sense, but instead it checked the ammo. Why I had to press a button and waste nearly a second any time I wanted to know how many bullets I had left, I don't know. It just seems intentionally clunky to do that than just have a number somewhere onscreen like for the health. After finally getting through to the boss level, I spent almost thirty minutes fighting not the enemies, but the system itself just to finish. Once I took out six guys, each with reach better than me, each faster than me, and each more capable of actually hitting me, I felt relieved. Then the boss ran out of his room and one-shot me. I tried again for a few minutes, but I just didn't have it in me after that.
Now, the PvE: unbalanced. When you play a game, the number one rule is to have fun. This can change with each game, but each of them have a hard and fast rule of making it fair. Fair doesn't mean easy, mind you, just look at Darksouls. Fair means that every single death should feel like it's the players fault, not the game's. Sure, it might be realistic that a dude holding a shotgun can kill you as soon as you peek the corner, but it isn't fair. This is most noticeable in the cat and mouse level with the two shotgunners. You've got to find a key, and if an enemy spots you, you're dead. Simple, but because the enemies don't make an idle sound, you don't actually know where they are, and because of the random pathfinding, you can't learn where they'll be either. What follows is a guessing game every time you need to open a door. Maybe it's empty, maybe you have to restart the level. When you actually get to fight the enemies head on, you learn that even if they were perfectly on level with you, they still have an advantage of being able to dodge and also attack at the same time. Not even the player gets to do that, so it just feels like you get your shit stomped in every time you go against one of them. A thing that might help this is to power up the throw attack. As it is, it does next to no damage and leaves you completely defenseless. If given the choice of doing things boring but consistently, vs doing a more fun thing that only works sometimes, and also puts you at a severe disadvantage, you will always pick the less fun option. Players are like cattle, sometimes you gotta lead them to an enjoyable experience. Also, when getting up close and personal, the player has a nasty habit of climbing the enemy. It puts the hitscan melee attack above their head so the player misses, and the enemy is clear to punish the player.
Now the playground, the level design: simple, but in the wrong way. It's boxy and the corridors are bland. That's fine, retro games all have that aesthetic to them and they do it well. The problem comes when all the important things blend in to the environment. The first two weapons you get, knife and pipe, are camouflaged into the world around them, so they become easy to miss. The only time that you see a car is also the only time that you need the knife. That knife, which is the only black weapon, hides on the only black surface. The first pipe you see, it's actually a part of the world so it looks like decoration. The lockers, you can't actually open them. The crates, you can't actually break them. The desks, they sometimes have an easily missable flat key on them. Which doors are locked? Don't know until you try. Even then, the game doesn't tell you it's locked, it just doesn't open. Some doors aren't locked, they just have nothing behind them, so it's constantly a guessing game where to go.
Finally, the suggestions: maybe helpful? I'm not going to lie, I'm not a master game designer, nor a coder, nor even an amazing gamer, but maybe these suggestions might help improve, if not this game, any game following it. First, sounds. It's small, but good sound design can turn a real piece of shit into something actually fun to dick around in. Bad sound design can turn a masterpiece into bargain-bin trash. Gunshots were way louder than they needed to be. The explosion when you reach that one exit, despite having my volume at 6/100, was deafening. Also, giving the enemies idle sounds is good. It lets the player know where the enemies are and whether or not they are searching for you. It also helps with timing attacks and blocks instead of relying on a purely visual method. Just footsteps and a swooshing sound would work. Next, Do something to buff the player to be stronger than the weakest enemies. Maybe stronger hits, maybe faster swings, maybe better reach, anything to even the odds against a group. Definitely give them an actual swing attack instead of just the hitscan. Next, give important items (weapons, keys, etc.,) a glowing outline. It doesn't gave to be distracting, but something to tell the player, "hey, you can fuck with this." Next, add music. There are plenty of creative commons songs on youtube that you can download. Hell, most of the games on this site use them. It pumps up the player and gives them a reason to continue playing after they keep dying. Also, those keybinds need some work. Honestly, since they aren't being used, Q and F are both closer than G and V. A sensitivity slider would also be appreciated.
In all, not bad. The art design, while simplistic, works for what it's going for. Maybe a little more blood, but I can see how memory constraints might limit that. For a first run at this game, it's not too bad. I know I just spent 1000+ words on the contrary, but truly, the problems are so close to being done away with. A handful of small changes, and the differences would surely be noticeable. I look forward to playing the next thing you put out.
EDIT: Just played the update, and the rebalance immediately makes this game more enjoyable. Also, thank you for taking my comments into consideration. I've increased the score I gave by a star. Good job on the quick patch.