I think it depends on WHEN you evaluate his mental state... in the 1920's and 30's he may have had some low level paranoia, inferiority complex, and a really weird relationship with his neice... that said, he spoke cohearantly, was a gifted public speaker and highly adept politician and political operator. Even into the early stages of the war, many generals (including those who disagreed with him bitterly in the later years, notably Manstein and Guderian but many others as well) commented that he had an astonishing memory for detail, and was able to recite impressive and complex economic figures just as easily as he could find the best place to site an 88mm gun or learn how a new aircraft engine would perform
From the winter of '41 on he steadily deteriorated into massive paranoia, sczitzophrenia, increased delusions, hearing voices, irrational fear etc... now this wasn't a constant inverted V decent into madness... he was still quite cogent even into late '43 and could make reasoned arguements with people and at least listen to counter arguements... but from then on, especially after july '44 he went off the deep end, suffering from his allready existing symptoms plus new ones that debilitated him mentally and physically
so the question becomes what went wrong with him after 1941... there are a lot of conjectures that have been put out there by historians and theorists:
1. His personal doctors, Morell and Stumpfegger injected him with all kinds of stimulants, sleeping agents, and mercury based quack recipes that altered his chemical balance... this was undoubtedly true, and has been coroberated by numerous witenesses...IMO it explains partially why he got so much worse towards the end, but I don't think it adequately explains his orginal problems
2. PTSD... this has been offered based on his impressive WW1 service, the death of his neice, and the WW2 war effort falling apart... its possible this had some effect, but then again he seems to have been damn paranoid his whole life
3. A physical illness either a brain tumor, or advanced syphillis...again its possible but was never conclusively proven... although after '44 he had all the well known symptoms of Parkinson's disease