Years of serial killer movie experience allows us to surmise quickly that this guy is not okay. And he isn't. And the movie wastes no time in establishing this.
It's a very bleak horror movie, and probably at that point in time included the most realistic portrayal of a psychopath out there (to be eclipsed by Henry: Portrait of a Serial Killer six year later). It's bleak because it offers no easy answers, and because Joe Spinell's performance is so eerie and believable. And the creepy and inventive soundtrack doesn't hurt.
As Frank continues his spree it appears that he's getting worse. He's less able to control himself and his outbursts aimed at his dolls get more and more manic, less and less understandable. And he starts getting sloppy.
The movie ends sadly on a low note, with a scene you are supposed to wonder whether it is supernatual, or all in Frank's head. Up until that point though, the movie is really amazing. It would only be another six years before the serial killer movie was perfected...