A very interesting subject. The paradox, I think, is found in the implications of tolerance, and the implications of judgment. That is, what do we mean by them and how are they carried out.
We're in a culture obsessed with blame as a facet of justice. Its emotional foundation is obvious: someone did something wrong, we want to punish them for it. Not revenge, but simply a reaffirmation of what is right and wrong. The burden of wrongdoing is placed on the offender. Disciplinary action and shame are our reactions to a breaking of the rules.
In comes psychology and shields people from this procedure. Bad behavior is excused because it had some cause. Because it was to be expected, and because it is believed that the normal response will not make things better. "They're not a bad person because.."
I think there's two linked problems in this. For the first, I agree with you, there is some danger in excusing bad behavior. Sure, some people are born with or acquire challenges. Mental illness is one of them. They will struggle with it, but you cannot let them off of the consequences of their actions. A cause or explanation is not a justification. That is my opinion.
The second problem, and I think this is the underlying one, is that punishment hardly ever makes things better. Jail doesn't fix people, shame doesn't either. We might have the best system of justice, given the circumstances. But what if the reaction to wrongdoing was that the offender had to do something to actually remedy the damage? It's probably too much to ask of our organized and anonymous society. But it might be a better fit for the minds we are equipped with.
We should never leave kindergarten. There, if you hurt someone, you say you're sorry and you have to mean it. If you do something by accident, you help out to make it better even so. As grown-ups, we are rarely as honest and brave as toddlers, and we wiggle away to feel better about ourselves. Anything to escape the blame, that attack on our self-worth that all humans fear.
What if instead of judging, "you are a bad person, now take the punishment," we could stick to "you did a bad thing, here's what's going to happen now." No matter if you've got a mental illness or not, the moral can be the same. But don't attack the self-worth, because that should be equal and constant for all people.
Whether this idea can exist beyond philosophy, I do not know.