I really, really dislike that the world seems to be PC'd into ridiculousness.
Idiot, moron, psycho, crazy- these are all words that are used colloquially to mean types of behavior. If I recall correctly, only one of those terms is related to a current diagnosis. I see nothing wrong with using the terms. HOWEVER, if it is something like "Jenny has bipolar, which means she's psycho!" then no, that's not ok. If it is "Jackie drove to her ex boyfriend's house, climbed in a window, and poured bleach on his brand new sofa, what a psycho!" well, yeah.