I'm not saying it didn't make sense for him to go insane, I just personally believe it made him a much less fun character to watch. Actually what annoys me more about his scenes with Winn is how contrived they seem in forcing Winn to remain a villain against all logic. It keeps becoming more and more obvious how stupid it is of her to continue consorting with Dukat and yet she continues to, even when she's actually told who he really is!
But Dukat's fanaticism over the Pah Wraiths is annoying too. I liked him more when he would brag about himself and his pride in himself and his race rather just blabbering about how great some (most of the time) unseen group of bad guys are.
He went from being an intriguingly crafty, arrogant, unpredictable dictator with a deliciously twisted morality about himself and his actions to nothing more than a cipher for some evil spirits that were never as interesting as he used to be.
There was a lot to him before, he wasn't just a mean person. His feelings for his daughter and Kira made him someone with conflicts with himself, so that watching him, you never knew what he would think or do next.
Once he went all religious zealot, all he ever did was praise his new evil leaders. He was basically reduced to those spirits' bitch. Part of the problem is also that the whole concept of Pah Wraiths strikes me as silly, although I did think the episode where Miss O'Brien got possessed by one was rivetingly disturbing and infuriating.