friends dictating terms on friendship

So I have this bipolar friend, who totally spazzes out at the most ridiculous things, gets indignant when someone else around him lacks even the slightest bit of tact and manners, and acts like his opinions alone are the manadate for the entire universe.

Recently, he insulted (possibly very severely; I only got his version of events, which, more than once, has been exponentially tamer than the real version of events) his best friend's fiancee, and his best friend, who is usually very caring, sensitive, and meek, lashes out physically, and uninvites him to the wedding.

Now, I tried talking with him last night, when this happened, and said that he probably shouldn't have said what he said, and I tried to give him a different perspective on the issue that he felt it necessary to insult her (the fiancee) over. He of course gets mad and hangs up.

Today, he calls me and tells me that I told him "this is where you went wrong, that is what you did wrong, this is where you failed," when that is most certainly not what I said. He then feels it necessary to dictate terms upon all friendships, saying that "friends do not tell other friends what they did wrong."
I heartily disagree, but seeing how he is very sensitive to stuff like that, I replied "Well, I do not like how you tell me what I should and should not do as a friend." i didn't even finish that sentence and he hangs up.

He has no sense of manners, tact, or even empathy, and clearly values himself above all other things and people, while at the same time hating himself for it.

What the hell do I do with people like this?

REAL insights would be helpful. Not bogus stuff like "you should bitch-slap that mofo." Thanks.


EDIT/UPDATE: So he called me again and told me that he said "when a friend is struggling and having a hard time emotionally, you do not tell them what they did wrong." Now, I'll grant you that statement is true, but that is most indefinitely not what he said. He then yells back at me, says that I must have misinterpreted what he said, like I do with everything else he says, and I am a worhtless fuck.

Again... how do I deal with this sort of person?

Jam it back in, in the dark.

Hey, thanks for all the thoughts guys.

One of the main reason why I don't want to cut myself off from him is because I am often his last option in friendship, and I don't know what would happen to him should every cast him off. He had already attempted suicide before, and failed with it, but I don't want to think that he might be driven to try it again, and succeed.

I realize that he goes through a lot of mood swings, and most of the stuff he says, like "worthless fuck" are absurd statements rooted in fits of anger. All of his friends, including myself, usually just forget all of his angry fits, after apologies go around. We all understand his emotional status, and I guess we have gotten used to that.

But like Alice said, it is not right for us to be walking on eggshells around him. This is totally unfair to him and us. This is the main reason why I ask for some help. Because I want to help him cope with how normal society works, and our normal courses of action seem to be ineffective.

We do lighten up Sass, btw, but if we laughed at him angry shenannegans, or didn't let him think that we took him seriously, it would probably make his already ill mood worse. Although... it is really tempting, now that you mention it, to find out what would happen if we all laughed at his pathetic threats and insults.

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