But later, it is revealed that she was mentally ill and she abused
Arthur, causing him a head injury that in turn caused his
incontrollable laugh.
It is not clear she was mentally ill at that point or even at all, an alternative view could be that Thomas Wayne used his power and influence to have Arthur's mother committed to a psychiatric hospital and the adoption papers forged to discredit her if she ever tried to make it public that Thomas Wayne is the farther. This may have even caused her mental illness.
There is a scene where Arthur holds a picture of his mother when she was much younger and he finds an inscription on the back of the image "i love your smile -TW".
This suggest to me that Arthur's mother was telling the truth about their relationship.
Brett Cullen, the actor who plays Thomas Wayne said to the Hollywoodreporter.com
"The backstory was that Arthur’s mother had worked for Thomas in his
home, and she was a beautiful woman who Thomas was attracted to and it
led to a physical relationship," Cullen says of his conversations with
Phillips. "Later in life, she’s in and out of mental institutions. And
in my mind, Thomas Wayne put her there."
hollywoodreporter.com