I never paid much attention to how the characters look when they have their KW mode on, but after browsing through the Character Viewer mode, Max definitely has that slasher-smile working in full effect.
It's a nice touch though. It definitely adds to the mentally unstable image he's supposed to be in the game anyway. It's strange seeing his stoic face in his regular pose, then switching it to the KW mode and you get that creepy psycho-face.
But yeah, that guy seriously needs to lay off those meds.