Well, there should be some kind of line to distinguish craziness and real mental illness.
For example, if a character is adrenaline addict (not adrenaline as a drug, but rather prefers to put self into dangerous situations for the thrill), will be this characters actions considered as crazy? Most probably will be.
What we should remember, that a human brain is kind of sponge, it is a neurocomputer that learn itself with information it absorbs. We analyze information and act according to pattern that were set by previous experience. If someone's brain had experience much different to your and acts completely different, than you would in same situation, it doesn't mean that it is malfunctioning (as has some kind of illness), but rather was trained this way. You can consider such characters actions as crazy, because you wouldn't do this thing yourself ever. But you had different experience, right?
As for actual mental illnesses, I usually imagine mentally ill peoples as practically harmless.
Evil crazy mentally ill - this is something "comics-esque" for me.
And I will agree with Aria, that "capsuleer dementia" is a thing that makes you think you play a game.