This might sound a little odd, but maybe there should be some way to restrain the untold damage that a single crazed dwarf can do.
For example, in my most recent fortress (and it was a good'n - I had individual coffin niches with a statue of each dwarf or pet, as well as a fantastically engraved trade depot area), I had a few farming areas situated on the cave river. Winter came and went, and I pulled the levers to get ready for the new year's planting. Unfortunately, one of my other dwarves went stark raving mad for want of a particular ore (this happened about four times in this particular fortress). So I'm overseeing my bearded workers clearing rubble for a new barracks, when all of a sudden water starts rushing up the tunnels towards them. Consulting with my dwarven supervisors, it appears that a naked dwarf babbling about giant green anteaters opened the door of a flooded farm plot... and the rest is history.
So, my suggestion is thus - would it be possible to have some way to confine insane dwarves? Obviously not confine in a 'chain to the wall' style, but if it were possible to define a... sanitarium room. Possibly dwarves with health care would periodically take food and water to them. Maybe there could be a slight chance of a remission.
I know something vaguely like this is already possible through locking the door to the workshop a dwarf is in, but that's kind of... cold. Besides, forcing the player to care for unproductive dwarves might make the game a little more challenging, especially if it occurred early on in the fortress.