A 'Sanity' or 'Stability" stat modeled after Happiness could be fun, with the implication that being 100% sane and logical isn't always good.
The less sane, the higher the chance for a mood, and the variablility of their craft output...
So, a completly sane dwarf with the highest skill would consistantly produce ≡Exceptional≡ items, while a nearly mad dwarf of the highest skill would produce a mix of *Superior*, ≡Exceptional≡, and ☼Masterwork☼; because a creative mind is needed for inspiration.
Less sane dwarfs would also have a higher chance of making images of fantastic creatures like Dragons, Forgotten Beasts, Unicorns... while the completely sane ones would make 'An image of Squares/Circles/Triangles.'
Sanity could also obviously affect combat, with berzerkers, etc.
Decreased sanity would also multiply the affects of mood events (sadly, I have a close friend with schitzophrenia) so that small things like seeing disgusting vermin in a wonderful waterfall could give them mood swings. (My friends reaction to a plush purple spider during one of his episodes was... interesting. alternating between wanting it because it was purple, and loathing it because it was a spider every few seconds.)
Sanity would be affected as in Call of Chuthulu, having a loved one die would have some affect, SEEING a loved one die more, seeing a forgotten beast MORE... Watching as your wife and children are eaten by the winged furry slug monster with deadly spit from the depths, and you might snap right then and there.
If insanity were on a scale of 0-100, I would have Dwarves born at 50, and drop one point every year, so that young dwarves are more creative and exciting, but as they get older they get more down to earth, unless interesting things happen.
Maybe it would be a job for the Philosopher noble if he ever returns to have rational discussions with dwarves, accelerating their return to normal sanity levels... presuming the Philosopher himself is sane...
(I was going to post this as a reply in another thread, but rather than take that one off topic, I searched in Suggestions...)