The quest "Mind of Madness" you encounter Pelagius and Sheagorath having tea together. Pelagius says, "My headsman has not slept in three days." I know Pelagius's history, but it only gives a small amount of information on what insane things he did.

Any ETS lore junkies can explain, why his headsman has not slept in three days?

I don't think it's a lore joke.

Essentially, it's "My executioner has been so busy with his job that he hasn't slept in three days!"

Since, you know, you end up treating his crippling paranoia later in the quest...

You find out why he turned mad as well in skyrim