I agree with you completely, but if you want a bit of insight as to why this quote has become absolutely inescapable: Farcry 3. The antagonist in that game was pretty laughably overwrought, but people loved him, and that was one of his favorite lines.

The truth is that beyond the linguistics of the matter, it's just a wrong definition anyway. Insanity is defined by an inability to distinguish reality from fantasy, but that's too arcane a concept for most people to grasp it seems.