When you get there talk to Nein and tell him you are ready.
Now you need to learn to use your Psi-Blast. After a short talk with Nein you'll be given control back of Raz, your Blast is automatically set to the 'Right Trigger' so give it a show now by shooting at these tacky lamps and whatnot. You'll then learn to L Target and also switch targets with the Right Analog Stick when targeting. Shoot the Censor and then go collect the Mental Health it drops. After that he'll tell you about Raw Energy which are basically ammo for the Psi-Blaster. After Nein leaves, the Censor will keep coming at you and you can practice blasting, but what you want to do is going over to the controls and press 'Y' in front of it until you get it switched all the way up to the skull.
This level is going to be difficult to really explain where you're at since you can come from any side. But I'll try and describe the things that are on each side as you go to them and what your goals are.
You'll notice that a part of the box you are on has changed a bit and has some obstacles and figments now, and of course censors. Head over there now and when you get there Nein will pop out of a hole and tell you that you need to get the area under control by Psi-Blasting the valves like the one he shows you.
First jump up on the bed and there is a Dufflebag tag by the pillow. Also on the bed is a Vault jumping around, punch it to open it and get the "Sasha's First Loss" memory. One side has a triangle by the bed and the other has a square box by the bed, on the triangle side you will find the Dufflebag the tag goes to. Right by where this dufflebag is there is a "bridge" shaped piece with a cobweb in it we will have to come back and get later.
When looking at the pillow on top of the bed to the left is a floating box with the Hatbox tag on it. From here you can jump up some other funny shaped pieces and get on the headboard of the bed where the Hatbox is located.
When looking at the pillow if you go off to the right and start to climb up the pieces on that side you will find the first Censor Valve, lock on and shoot it to shut it off; another will appear after you do. It is going to be off the other side of the bed. Climb up the boxes over there to shut that valve off. This stops the Censors from coming and cleans up this part of Sasha's mind.
Now there appears to be more trouble on another side, so head over there to clean it up in the same manner. On this side there are a bunch of columns sticking up, on the smallest one is a Purse tag. The Censor's in this part are bigger and can not shoot stuff at you, so keep your eye out, they take two shots to kill instead of just one.
Start to head up these columns starting on the short one and jumping up them taking out the Censor's along the way. You only have to go up a few of them before you are able to shoot the first valve, but of course another valve pops up. Climb up all the columns and you'll see some floating circular platforms that you can continue to climb up, at the top of these you'll find the Purse! From up here you can shoot the second valve in the area to clean up this side, but another pops up!
This side has a new enemy for us, some sort of Bomb headed creature, these guys will run up to you and explode in front of you to hurt you, they will also explode when you shoot them so don't get too close or you'll get hurt when you kill them.
In this area you'll find a Steamer Trunk Tag in the middle by a ladder. After you get that climb up the ladder, when you get to the top watch out for the Censor's shooting stuff at you. When you get up here you should be able to see a yellow colored rail that leads to a circular platform of the same color, the Steamer Trunk is right over here and to the side of it are two more platforms right next to the first valve.
Now go back on that yellow platform and step onto the rail which you will grind over to the end of it. If you were to climb up this stack from the bottom you would come across a cobweb, however, we still can't take care of those yet, so stay up top now. From here if you look down on the stack of boxes you are on you should be able to see the valve switch, just jump down and shoot it to switch it off. That's another cleaned side, but of course you aren't totally done yet.
This side has four sets of stairs leading up to a middle area, each of them has fire that shoots out so watch out. Along the bottom of one of them is another cobweb we can't quite get.
Besides these stairs we can climb up some platforms that are closer to the core of this contraption, near the bottom of which is a Suitcase Tag. Climb up to the top of this thing and you'll find the Suitcase sitting there. That covers all the baggage for this area.
You can also shoot the last valve from this area so do that and a scene will occur. This is not the end of our problems though, we now have one very big problem...
Here we have in front of us a large Censor dude. Let's look at what we have going on right now. This huge dude is in front of us and grabbed Nein, there are little censor dudes running around everywhere that we'll want to kill to get Mental Health and Raw Energy. Right now there are 5 valves, 1 on each side of the box minus the side you start on that will rejuvenate him after you attack him.
This guy will try to attack you by running up next to you and then stamping you, you'll want to use evading to avoid this and also if you are just running away he won't be able to catch up to you and get you. However, he also has an ability where he rolls some sort of weird ball at you, so you'll want to watch out that you don't get run over by these things.
The first thing we are going to want to do is to run to each side of the box where a new Valve is located and shut them all off. You'll shut them off in the same manner you shut off all the other ones in this level.
Now it's time to lock on to him and start using our Psi-Blaster to shoot. It's key now to use your evade skills to avoid the balls he throws and his stamp, also keep an eye on the little censors running around and try not to get swarmed. Kill them whenever you need health or ammo. He'll take about 8 shots to go down.
After taking him down you are given your Marksmanship merit badge! You now have the Psi-Blast everywhere you go! FUN NOTE You can now take the bears around camp down in 3 shots. Woot woot!