What Does The Ending Of Blair Witch Really Mean?
James Thought Lisa Was Heather
The other major reveal with the tape is that James had mistaken Lisa for Heather. While that's fair enough - it's a split-second glimpse, Lisa's covered in mud and they're not dissimilar looking - it does provide a bit more of an in into James' psychology beyond holding out hope for finding his sister.
Throughout the movie we see that there's clearly some sexual tension between the pair, especially from James' side of things - they're far too quick to downplay being in the same tent and when things go to hell cuddle up. If he's mistaking the girl he fancies for Heather, it's clear his obsession over her disappearance goes beyond tricking himself into thinking she's survived.
There's something stilted in James' emotional development that almost has him dependent on finding Heather - even after admitting he was probably wrong, he still chases after what could be his sister - and that relationship shows it lies much deeper than it at first seems. He's destroyed by grief as first insinuated, sure, but it's developed into something more obsessive.