I do this a lot, and can vouch for the general approach.
A tip from the trenches. When faced with bizarre and disturbing behavior, clinical psychologists will often verbalize the behavior they're currently witnessing. It's a way of helping the patient realize that their behavior is abnormal without moralizing or recoiling in horror.
Hence the pro-tip. Instead of getting indignant, just say something like "You're suggesting I actively undermined the project" or "you're smearing your own excrement on the wall".
"And here we find the Donna in its natural habitat, scientists where surprised to discover the Donna can eat its own weight in fried chicken every week" that kind of thing.
If she's have a bad week I send her narration to make her laugh.
It sucks watching someone you care about get ground down though.
Maybe more often truth than fiction. The mental disorders aren't so rare.
Today there is a thread on "burnout" being a "mental diagnosis." I suppose that covers many of us.
One of my pet favorite tips: pretend you're a research psychologist observing a patient with a rare mental disorder (doesn't solve all of the problems, but at least helps to cope).
https://www.amazon.com/Asshole-Survival-Guide-People-Treat/d...