Disclaimer
Imo, this is marginally about copyright, and tangentially about games. Instead, what you need is legal advice. So disclaimer ahead:
I'm not a lawyer; this answer is not legal advice. Furthermore, I mention rights that are not universal, and may not apply in your country. I don't even know from where you are, or where you plan to publish.
Note: My knowledge of the law comes from my training as security information specialist. As such, I need to be aware of laws important in cyber-crime (including copyright, privacy violations and the treatment of personal information in software) in international law (because software may end anywhere on the world)... yet, this can't be considered a replacement for legal advice nor consulting your local law.
Answer to the edited Question
During these events, some people I know do not appear in a very positive light. I am afraid that these people might feel that it is an infraction on their personality rights. I also plan to unveil some of my own actions which they didn't know before and which could make them angry if they knew of them.
See "Notes on Defamation" below.
What should I watch out for when I write and publish the game to make sure I won't ruin my relationship with these people?
There is always a chance that a video game will have a negative reception. This is also true for video games that are not dealing with sensitive subjects.
For your particular case, see "Two Paths" below.
Legal Considerations
Copyright: any artistic work or publication (unless stated otherwise) can be considered under copyright. If need to use any for your game, you should find out if it has been published to public domain or can be licensed to use. The license may be a periodic fee, one time payment, a fraction of the sales, etc... You may also consider fair use, for example in reporting news or real events you may be able to quote the speech or use the images of relevant people under fair use. Note: in the case of a deceased person, may countries still recognize copyright and the loyalties goes to the family, who may create an organization to manage these rights (for example, granting licenses posthumously).
Privacy: each person is the owner of their personal information. Also, in your case you could consider any personal information to be sensitive; this is because making this information public may cause harm※ to those people. You need consent to use this information in your work. Note: in the case of a deceased person... for the law that I know they don't have privacy, yet, you may have to consider if the information is sensitive to somebody else.
Image rights: each person have the rights over their likeness. If you wish to use the appearance of a person you may need to negotiate the image rights (A possible exception to this is a parody of a public figure). Note: in the case of a deceased person this rights belong to the family, unless given to third party either in life, by testament or posthumously by the heir.
※: If some information may open a psychological trauma, ruin a relationship; make the person target of discrimination, etc. A particular example comes to mind: Let's say that a particular person was a victim of sexual assault, this will make this person impure in the eye of various religious groups... thus an untimely reveal could damage a romantic relationship or the status in society this person has.
You have your freedom of speech and freedom of press to publish real events. Yet, this right ends where the rights of others begin. The considerations above are the same that lead to TV news obscuring faces and distorting voices.
Also, you are not a judge. If there is an unresolved crime, you should refrain from portraying a real person as guilty. This is why news will often use words such as "alleged", "presumed" and "suspected" (although some media outlets overuse these). If you have new evidence you may want to submit them to the authorities and let the case be resolved... or you may state your work as fiction.
Finally I want to repeat that this is not a replacement for legal advice, you can consider this a guideline to what to ask your lawyer.
Answer To the Original Question
People would claim a breach of privacy, if they randomly found themselves in a game. If they know i made the game, they would realize that they are the ones depicted. Even if they have different names and appearance.
Yes, this may happen. To avoid this, any personal information (starting by their names) should only be used with the approval of the person to whom it belongs. This way any private affair depicted in the game won't be associated with the person unless that person is ok with that, also no sensitive information would be disclosed by the game without authorization (including but not limited to: sexual orientation, political views, contact information, etc.)
You should also consider image rights; people have an inherent right to their likeness. Because of that (unless it is public figure, where parody right or freedom of press applies).
People would be filled with rage now that my actions are unveiled. Before they were blind to the truth.
You decide what you publish and in which format. If the rage of the users is a concern, then take it into account. Note: many existing games can cause rage and frustration to its users.
Edit: In the case you get threats you should let the competent authorities know, also consider relocating away from these people.
People would claim that i was recording their actions. I cannot analyze myself, if i don't mention key events to show how interpret myself.
Were you?
Don't tell me.
People could say that their speech and actions they did in public places were copyrighted. For example, if i mention a bully's response, he used in his anger, would i be liable to copyright infringement?
You can always paraphrase.
Unless you are using an actual recording in your game (and as long as long you are not under a non-disclosure agreement) you may have right to quote.
It may be the case that the person in question has used his words in another work, and that work is under copyright. In that situation his words are under copyright. In this case you can still quote, yet you may have to defend your fair use. In this case you could argue that your work is a completely different, not competing with the quoted work.
Now, this is tricky, you would have to credit the source of your quote, but if the person in question doesn't want to be associated with your game that would be problematic.
Just paraphrase.
One event would allow others to interpret their behavior and therefore expose their entire personality. Everyone would know exactly how they think.
I don't understand what you say here. Are you claiming that your game provides psychic abilities?
Edit:
Past behaviors of others allows you to interpret their character. For example: if I know you did X, i can assume you are Y. Yes, there could be a generalization error but it provides relevant statistics to interpret his personality.
This goes into the idea of defamation I mention below.
Several events that shaped my personality would harm those that surrounded me.
Ok, now you are claiming that your game will cause harm and you know it. This is an ethical problem, beyond the scope of this answer.
If i mention this is a work of fiction, would it fix the legality of the game ? The problem is, once the see the developer's name, BAM, they know it is me.
You can publish your work under a pseudonym if you don't want to be associated with it.
They could deduce it is me, by viewing too many similarities.
Of course your work would be subject to interpretation.
[Pure Removal of others] If i don't mention any of the events that happened, but only how i felt about them, the entire plot becomes obscured and meaningless.
It won't be meaningless, perhaps it will be cryptic. People can assign meaning to any work. You as the author give it the first meaning, yet reinterpretations will come.
In fact, it is possible that people may take it as a metaphor for some real life problems, or could take it as a cautionary tale.
So, no, it won't be meaningless.
Would it be cheaper to publish it anyway against their permission (they wouldn't consent, no matter the circumstances), face their wrath in a legal battle, and give them a percentage of the game's profit's. Could the penalties be above the game's profits.
I couldn't know. I don't know what the penalties would be according to your local law, nor could I predict the future profits of your game.
Notes on Defamation
You haven't said it explicitly, yet I suspect your actual concern is not privacy nor copyright, but defamation.
Many courts will not defend the right to a good name when the claims against them are true. To put it bluntly: they will let you call whore a person as long as that person is actually (and not figuratively) a whore. In this case your freedom of speech wins.
As per the legal battle, you may be required to demonstrate beyond reasonable doubt that what you depict in your game is the truth. That is, that you are NOT depicting people worse than they objectively are.
You may also want to look for antecedents in the legal history of your country of famous cases where this has happened. Consult a lawyer.
Two Paths
You seem to want to reveal some information, yet afraid of doing so.
There seems to be two paths here:
Conceal the truth: change names, changed appearances, remove details, and make it pass as fiction, publish under a pseudonym. This leaves the work open for interpretation. Working with this constraint probably makes for a more artistic work, yet it may defeat the point of publishing this work.
Embrace the truth: you may try to get as much consents and as much evidence as possible, in order to create a depiction closer to reality. You would have to defend your rights to speech and information, freedom of press, etc. I'm guessing it is harder to accomplish this way, yet, perhaps, that's better for you.
I suspect you want to make a work closer to the truth, so I suggest finding actual legal advice. You may be able to get it cheap or even free from law schools that provide this service as a way to have their students gain experience.
Information about Criminals and Victims
I want to add that information published by the government can be considered under public domain. The key word here is published, if it is something that media can replicate (for example, something that appears on TV) then it is fair game.
I mention this, because after I posted the original answer I had the idea that perhaps your trouble comes from the need to portrait a criminal, and such criminal will most likely not agree to be associated with your game. In that case, if the information of the criminal was published (for example, they have asked the public for information that may aid the capture of that criminal, and along with that they published name and picture, you can use that) you can use it, and if that criminal has been taken to jail you won't have the trouble to demonstrate the crimes.
Note that when I mention demonstrating the crimes is to get free from a defamation claim, not to bring a criminal to justice.
Copyright on Crimes?
Remember that copyright applies to artistic works and publications, not to crimes. A criminal doesn't have copyright over his activities outside the law (and pretending that the government will protect such claim is absurd).
Yet, if the criminal has publishes a memoir and your game is strongly based on it, then yours is a derivative work. You may circumvent this by avoiding using material from such memoir or you may make a deal with the criminal in question.
Note on Victims
Again, the victims don't have any copyright to what happened to them. Those are facts, nobody owns the facts. Also again the situation of the memoir may happen with the victims.
Yet, aside from that, you need to worry about sensitive information and image rights.
Depending on your local law, you may be able to use the information of the victims but be required to remove it if you are requested to do so by the titular of that information... avoid doing (unless it a web game) because it may mean to track and recall copies and installations of the game.
