That's the question asked in the New York Magazine:
Has Bush simply lost touch with political reality? Or has he actually lost his mind? ...
We are looking at a presidency that is, for all practical political purposes, finished—except to the extent that Bush can wreak more havoc by means of his monomania. The cynical interpretation of his recent moves is that he is stalling, trying to buy himself a few more months of time, praying that something, anything, will happen in Iraq that will let him claim a kind of victory, however trifling or evanescent. But I don’t quite buy that theory. The more convincing explanation is that Bush believes he is playing for history now—hence his obsessive focus on the single issue that he believes, rightly, will define his legacy. Where we see a failed president in Bush, he looks in the mirror and sees himself as a leader who pursued a burdensome, painful path and whose vindication will be meted out long after he has left office. As a righteous man who forged ahead in the face of weak-willed and wrongheaded opposition, in particular the impulse toward appeasement. As Harry Truman. As Winston Churchill.
Pathological narcissism? Delusions of grandeur? Res ipsa loquitur.