Perhaps I oversimplified. Just because he is crazy doesnt mean that all of the things he did/said were crazy as well. He recognized the danger of elijah and set him on the trail of the sierra madre. He save christine royce from him, and spoke to the think tank and tried to get them to change. They then erased his conversation from their memory because they refused to change.
It was only when they told him about the bombs and had seemingly exhausted all options that he finally gave up and said fuck it, burn everything. Not the ideal decision, but in the end, he saw nothing else.
By the time you reach him, he has become so lost in his ideology that hes almost irredeemable. But not entirely. If you kill him, so be it, so ends his story, much like many others in the wasteland who tried to change it and failed. But if you dont, you make him realize that before he gave up hope, he was right: the new world DOES hold something worth saving.