There are three simple solutions: Either Jyggalag got a nasty knock on the head and went nuts again, your hero from Oblivion has settled into their job as the new Lord of Madness and shapes themself to suit the role, or the hero collapses under the pressure of the job and goes genuinely insane, becoming a true replacement for the old Sheogorath.
More screenshots:
HOLY SHIT STARSIGNS
