The Horror
For one, every player knows everyone else. If they are playing to survive, it's difficult to have the players role-playing paranoia. Survival horror tends to attract folks who play to win, so they won't believe that someone is a flesh-eating mutant in disguise unless they have some reason to think otherwise.
There are two approaches you can take: tell the player who has been replaced that he's a shapeshifter and ask him to play along, or not tell the player at all but eventually spring it upon him (and everyone else) when the moment is right. The game master can then have the player join in the fun, controlling his character, or sit back and watch while the GM plays puppet master.
The problem with the first approach is that the player may not play along very well, inadvertently giving away the secret. Alternately, he may even let it slip on purpose. When this happened to me in a Champions game (Jeremy played the turncoat, I know you're surprised), the players were shocked. I was actually pretty pissed about it, because there wasn't any in-game opportunities to discover the betrayal. We were sitting ducks, because of course we trusted each other. That's why we play a game in the first place, right?
Having the player not know he's the betrayer causes other problems. In my 3.5 D&D campaign, I had Joe L.'s character keep a secret from the others (as well as from the player himself), then reveal it to everyone. The other players were unhappy, questioning whether or not Joe L's character would actually keep a secret from them. Again, I violated an implicit trust, and the players were uncomfortable with it.
But what if that's the whole point of the game? Many of John Tynes' Call of Cthulhu scenarios are built around the notion that nobody is your friend. Indeed, this is the purpose of many con games – eventually the tension is eliminated through conflict, and that conflict usually has permanent and dire consequences. That level of distrust harms party cohesion, which is appropriate in a short-term horror game.
The key is to make paranoia feel real to the players without harming their fun. In other words, the threat of a shapeshifter replacing someone can actually wreak more havoc than the shapeshifter appearing in all its glory – if you've ever seen John Carpenter's The Thing, you get the idea.
Ultimately, shapeshifters replacing characters is a very personal violation of the group's trust. Game masters should choose the method of inserting a shapeshifter that best fits their players' style of play. But don't be afraid to give them a little push here and there either.
Your Turn: How do you handle shapeshifters in your campaign without pissing players off?

