He was crazy-town banana pants, but as of the finale he's finally cured. Well, not cured, but realizes he's crazy.
He's not even close to cured. It was all lip-service, taking down the holode... imaginarium. And then we see the sinister move of him stepping into his own, privite, mini crazy-box.
The first time, he wanted to gruesomely chop off his friend's arm. Something like that doesn't usually taper off and get better.
This IS supposed to be a light-hearted sitcom. Or so every ending has me believe with those simplistic speeches and resolutions, which seem to be getting worse with every episode! Especially when contrasted with Abed's crazy.