aight heres what I'm thinking
"was Dicaprio fine the entire movie?"
I believe that he was insane for the whole part until he had the surgery. When he met with George in the C building he told Teddy what had happened over the past two weeks. From Teddy's point of view it seemed as though George was saying it was his fault he got him into Shutter Island...not the fact that he beat him up for calling him Latus. The Rachel he met in her room was actually a nurse that worked on the island. Also, in the beginning of the movie when Teddy and his partner arrived at the island the gaurds started to act very strangely. This is because they knew of Teddy's aggresive behavior and were scared of what he might do to them. Finally, when they arrived at the main gate his partner was unable to pull the gun from his holster. This shows that he had no experience with a gun because he was really a doctor. However, I believe that after Teddy's first surgury, he was completely sane. He realized the reality of his situation and decided he would rather become a "robot" instead of living with his past.
"and if they were doing the surgery where at? "
I believe the surguries were done at the lighthouse because at the end when they sent him to recieve a lobotomy the lighthouse was the final shot in the movie.
Also, after his first procedure he woke up in the lighthouse.
Also why did the crazy lady write "Run" on the notepad?
Some may say that the lady was instructed to write "run" because they wanted to create the fealing that he was new to the island and unaware of the dangers. However, I believe that the lady was trying to help Teddy. She tried to break through to him and make him realize that he was just another "test".