I think this gets back to what truly indicates insanity. For instance, I have a friend who has severe schizophrenia -- he has very realistic hallucinations and hears voices telling him to do horrible things. Most of the time he knows that the voices are only in his head, and that he shouldn't listen to him. At those times, I'd argue that he's completely sane because he can still differentiate, though doctors put him in long-term inpatient care. If he gets to the point where he's no longer sure about the voices, or when he completely losing the differentiation between the two, that's what I'd consider insanity. He does worry about forgetting the difference, and is completely terrified when he talks about it, but he thinks he's already insane.
They say that truly insane people don't know that they are. It seems that this is true when they're "not lucid," as we'd say, and so by my definition someone could go in and out of sanity. I've seen this in my grandmother, who had Alzheimer's, and also in myself when they put me on the wrong meds and I started hallucinating. When I saw the hallucinations, they were perfectly real. Sometimes they were people I know, and I didn't know they weren't really there until later, when the meds got out of my system. At the time that I didn't know the difference between hallucinations and reality, it didn't bother me one bit beyond occasional confusion about why that person was there. It stressed me out in hindsight, but the docs took that as a sign that I'd returned to sanity.