I absolutely love Daniel: I haven't listened to
everything, but he's an incredible pop songwriter. I was lucky enough to see him live a few years back with Teenage Fanclub backing him up, and he was in top form. I do appreciate that his recordings/musicianship are pretty hard for some people to see past, and I second Hypehat's recommendation for the 'Late, Great Daniel Johnston' tribute album. If you still can't see the brilliance of his songwriting in that setting, well...
The mentioned documentary "The Devil and Daniel Johnston" I consider a must-see. A brilliant piece of documentary filmmaking in its own right that put the artist in the best possible context to appreciate, to my mind.
What's amazing about that film is that there is actually footage of events like the NY Sonic Youth episode. I also love that it doesn't glorify his illness: it shows it warts and all, and how devastating it has been to him, his family and others.