It's an accepted fact that dorfs are beard-hair away from mental retardation and pretty much lemmings. On occasion (i.e. damn near all the time) they go crazy.
I submit that this is not because of them suddenly snapping and losing what little self-control they once had, but rather them awakening from their idiocy and ignorance and getting a glimpse of the world around them like some character in a Lovecraftian story. The realize that their world is run by a omniscient god figure who is, at best, ambivalent to them, and at worst, utterly sadistic (most likely the latter if we're gonna be at all honest here). Everything is trying (or at least able) to kill them or bring them suffering and there is little they can do to stop it. Like a Lovecraftian character they often are drive stark raving mad by this revelation and proceed on a number of different paths.
1. They claim a workshop and demand materials to build some grand object to either appease this God or deny it's power over them.
2. They become horribly depressed and eventually stop trying to sustain themselves or actively seek the sweet release or death.
3. They begin trying to kill any other dorf they can find to release them from the torment they've yet to realize they live in.
Thus dwarven insanity is not the last of their mind unraveling....it's the pieces falling horribly into place.