What it means
A headcase is someone whose behaviour is a bit unhinged, wild, or unpredictable, the mate who does daft things for a laugh or the person you genuinely worry about. It swings from affectionate ribbing to real concern depending on the tone.
Usage examples
"Don't dare him to do it, he's a headcase and he actually will."
"He jumped in the canal in January, absolute headcase."
"You can't give Liam fireworks after two pints, the bloke's a complete headcase."
"She's lovely, but she's such a headcase when she's got a crush on someone."
"That lad tried to crowd-surf off the bar stool, he's a proper headcase."
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Where it comes from
Headcase grew out of the older form head case, which shows up in medical and psychiatric language for a person treated as a case. From there it drifted into everyday English in the late 20th century and lost some of that clinical stiffness, landing as slang for someone erratic, chaotic, or mentally all over the place.
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