I think it would be better to state that the problem is that insanity is currently an all-or-nothing switch between fully functional dwarves that suddenly become homicidal/suicidal maniacs all at once, with zero transition. (To use TV Tropes terms, it's the "Critical Existence Failure" problem, where a creature with 1 HP left is just as healthy and active as a full health creature, but instantly explodes in gore the moment they hit 0 HP, with no tiring or death throes outside of cutscenes.)
Semi-recently, Toady introduced things like depression or obliviousness to be temporary-step warning signs, but even then, it's more just a warning before the snap, rather than a real progression of a disease.
What would be best is if there were a list of tiered psychological issues that could be recurring, such as
Vaillant's categorization of defense mechanisms.
When stressed, dwarves react with lower-tiered defense mechanisms to counteract the stress.
Hence, you might have a progression like the following:
Tier 4 (normal, minor stress reaction) - Suppression (character delays reaction to stress by attempting to ignore it until they can find something that will dissipate their stress.)
Tier 3 (occasional, but not uncommon reaction to a stressful situation) - Dissosiation (Could be like current obliviousness, or have the dwarf simply not react to things they should, such as not running from hostile creatures.)
Tier 2 (reactions to severe or sustained stress / the warning stage) - Schizoid Fantasy (Character will act as though things are different from what they actually are. A simple example would be treating a chair as though it were a mortal enemy and attack it.)
Tier 1 (critical stress levels) - Fugue (current Catatonic)
Each character would have a set of four tiers of defense mechanism, depending upon their personality, like the way that dwarves are currently split between berserkers or catatonic or melancholy dwarves.
Dwarves act upon a tier of reaction any time they take a "stress shock" while at a level of stress that forces a particular response. For example, a low-stressed dwarf only reacts to seeing a hated vermin by suppressing, but one already at danger levels reacts to seeing hated vermin by going into schizoid fantasy for a period, attacking someone or something random nearby in a tantrum until their overall stress isn't pushing them to such extreme reactions.
Likewise, each dwarf should have a specific "relaxation activity" that they specifically try to perform when stressed. This might be appreciating their favorite door, or losing themselves trying to create a work of art with their mastered skill (if an appropriate one exists, and their goal in life involves mastering skills or creating art), or just getting plastered at the tavern. A suppressing dwarf might, for example, react to a hated vermin by deciding to go do that favored relaxation activity next (such as deciding to go make a new artwork
immediately, or else going back and taking another drink at the tavern as soon as they finish their current task). A more stressed dwarf, after they recover from their extreme outburst might try to take this relaxation activity to a higher extreme, such as a dwarf creating art until they are near collapse from needs, or a dwarf pushing alcohol poisoning at the tavern until they can burn off that stress to a more even-keeled level.