What do we mean when we say it today?
Something might seem crazy, but it has a purpose. That's what we mean when we use this phrase today. Whenever someone wants to convince others that they're not actually crazy, or that what looks nuts is actually part of a crafty plan, this phrase comes out of the woodwork.
You might catch a friend in the middle of dancing around wildly to a song, or hear your mom recite a nonsensical grocery list from her head while folding the laundry. Embarrassed, they might say "there's method in my madness!" to explain themselves. Any cuckoo thing can be defended with this phrase.
It's also a Bee Gees song and a Mason Jennings song. Although we're not arguing there's any method in the madness that is disco.