Yes, in my congregation there was a palpable depressive air about the place. I've read elsewhere that JWs were reported to have higher proportions of mental illness compared to the general population, but I've never seen any scientific or professionally refereed journal articles on this. I personally do not believe that the Watchtower causes mental illness, although a far more helpful question may be whether it increases people's susceptibility to these illnesses.
I offer three alternative hypotheses for why mental illness could be more prevalent among JWs:
1.The JW message attracts people who are already struggling with mental illness issues (i.e., these people probably struggled with emotional and psychological problems before becoming JWs). The sad realisation for these people is that the Watchtower does not help them to more constructively manage their mental health difficulties.
2. The JWs isolated and estranged status compared with other religions gives them fewer options for helpful problem solving. Also, in many countries, including Western ones until recently, JWs are treated like outsiders and the stress associated with being "off-side" with the world may contribute to their susceptibility to mental illness.
3. The JW message states that it is no use trying to improve conditions in the world because it is under Satan's influence. THey are rather more better trained to critique their social and political environment than to improve it. Hence, the JWs have a rather cynical, resigned attitude to real-life problems in their respective localities. Social psychology research shows that people who feel they have limited control over their environment are more prone to "learned helplessness" than others. Learned helplessness is one of the key factors that leades to depression.
There are no doubt other hypotheses about why mental illness seems so prevalent in the Watchtower Society. None, to my knowledge, have ever been verified or replicated in research. Also, in my clinical work, I've observed that members of no religion are immune from mental illness (i.e, sadly, the JWs are not unique).