I think you're arguing with the tone, but not the advice -- reading gwern's post, by the end of it I had a pretty strong feeling that he was being unwise (and somewhat cruel) in the way he carried his side of the exchange. Taunting the mentally ill (and intentionally encouraging their delusions) just to eke out a bit more "purple prose" is a bit mean at best, and could be quite damaging to them at worst.

I suppose you might take issue with the word "crazy" generally (that's fair); but the real point is that there can be real-life consequences to pressing the buttons of the mentally-ill that can be way out of whack with your actual interaction -- e.g., with a more balanced person an internet argument is a minor diversion and possibly an annoyance. With a mentally-ill person it could be the same, or you might set them back months in therapy, or they could commit suicide, or they could harm others.

Have we really reached the point where we are calculating the likelihood of "sav[ing] someone by argument" vs. the risk of civil liability?

Option one is futile waste of time; option two involves real-life permanent damage (first to the ill person, incidentally to you) -- basically, don't wade into an exchange that will be (1) and best and (2) at worst.