I do not believe in the Frank Miller school of thought that Batmans crazy. I think its a cheap and stupid out for explaining the character, the costume, and his motivations.
He's haunted by his demons certainally, and he's unorthadox in the way he chooses the execute his mission. But he is not crazy and thats what seperates him from the villans he fights and a big part of why they always lose. The only villan who truly realizes this is the Joker. Which is why the Joker, in a phrase wants to make Batman "laugh".
Also, in the context of *our* world Batman may be viewed as insane, but in the world setting in which he exists, his response is not that out of context.
This isn't reality tv, this is Batman. (thank god).