My question is do you gain the benefits if you are insane and your gear is all bone or if you are insane and it gives you bone in all of your gear spots? If you can only use it if all of your gear has bone, what good is it? Is here an armor set that has bone in it that I'm missing?
All gear needs to be bone.
In the core campaign, I've mostly found it's good if you only have 3 fully armored survivors and the 4th can be a glass cannon. Also, one of the shields is bone, which helps a lot.
The expansions provide quite a bit more options.
My group had great success with the Bone Build. There are files on this site that sums up all the bone gear you can find.
Here was our build SPOILERS in terms of gear onl:
Lion Cloak (?)
Beast Tooth Katars (the stone circle one)
You take one less damage from all attacks and have 1 armour on all slots and can block an attack with the shield.
Spoiler: We had the armour shrine that pushed it to 2 armour.
The katars a pretty useful as you can ignore one hit locations reflex of your choice. This adds to survivability and also the evasion tokens from Mastery. Having 6 attacks will help you get those perfect hits for evasion.
What I didn't reach was the hollow swords from the Plumery. It does almost the same thing as Katar when you can choice where to wound with specialization.