How would Papyrus act if he was just as aware of what’s happening around him like Sans?

The purpose of his self inflicted delusion is to spare his soul, his good, tender soul, the corruption of the world. Without the imaginary world he exists in, he would lose his mind entirely to the horrors and atrocities that he and his brother have committed, far too connected with his soul to live with himself. He is a strong monster, but his soul is too caring.

He would fall, and he would die.