> Is it surprising that people are happier and better able to deal with their illness when they believe they are doing meaningful work and are useful to the people that surround them?

This is one of the many reasons that thinking that "poor people" are just lazy. To feel useful is a very basic human need. To the extend that even very rich people that does not need to work still does it.

> The sisters who ran the home, though perceiving his confusion and delusion, respected and even reinforced the identity of this somewhat demented resident, who, they felt, might fall apart if it were taken away.

Maybe a definition of sanity is the ability to deal with the lack of purpose. Most people is going to feel stressed and try to find a way to be useful again. Only when you are sick - whenever is dementia or depression - you stop being able to find your place in the world by yourself.