[werdnapk]

Where is this considered slang for lunatic? I've only heard this as slang for homosexual.

[hanoz]

It's common in Britain. As far as I know the thinking is: nut (head) => nut case / nuts / nutty etc. => "nuttier than a fruitcake" => fruitcake.

[dzaragozar]

http://www.dictionary.com/browse/fruitcake

Second meaning

[civilian]

You might listen to the song "Fruitcakes" by Jimmy Buffett, he plays with this pun. :]

[grogenaut]

Heard it all the time in Missouri growing up.