It's a little unclear - did this person turn from fun and lively into dour & depressed, or do they simply go through periods of withdrawal? The answer ultimately lies with how much (or to be more accurate, how little) you care for them and whether you can tolerate their pain with little bother to yourself. If you can let this guy have his down time, and your heart doesn't ache for his pain, then it could work. You could just enjoy the good times and ignore & avoid the bad ones.

Also, can you let another person keep their flaws, even self-destructive ones, or will it gnaw at you? Do you feel that it's your responsibility or obligation as a friend to make them feel better?

It sounds to me from your post that your tolerance for mental instability is low. So I bet that for you, the answer is no. Already, in your post, in the way you phrased the question, I hear echoes of "am I obligated to stick with this person?" Of course not. Everyone is responsible for their own fate and their own happiness. You weigh the cons and pros. Net-net, does this person add happiness & joy to your life or detract from it? Personally, I give a much greater weighting to the negative effects - I'd give up a week of happiness to avoid a day of pain. I'm too easily swayed by negative emotional disturbances. For me, stability, harmony & peace are more important than blithe joy. How does it add up for you?