Basically, he's drunk. No one could be that good-natured without being on something. And some of the things he says! Like when Heero took parts from Deathscythe in episode two, he yells, "What!?! I was just complementing him! Traitorrrrr!" How is Heero a traitor when he never formed any alliance with Duo to begin with? Ah the logic of a drunk. Then the "Damn! What a dinky way to kill us all off," when Tubarov cut off their oxygen supply. What sober person actually uses the word "dinky"? After that he started rolling around on the cell floor and saying, "This is such a lame to die, this is so not cool." That's self-explanatory. Plus the little bit about threshing wheat before he gets Heero out of the medical building in episode three! Complete drunk talk. He never does that. I think he was imagining talking to someone about wheat. And I'm not even going to go into his little "smiles" spiel from episode twenty-three.
Now Duo does sober up a few times. One would be when he sees the Deathscythe get blown up by Trowa (Damn him for that! But he's still bitchen) and screams "Nooooooooo!!!!!!!!" in episode twenty. He was obviously sobered up from that very depressing shock. Another time would be when he was forced to fight in the Wing Zero. That would sober ANYBODY up real quick. He became sober after destroying the second Vayeate and Mercuriouses and realizing how horribly injured Hilde was (I hate that wench! She's a twit!) in episode forty-five, too. There were a few other moments throughout the series when Duo was sober, but for the most part, he was drunk.
Thanks to Kelly for also pointing out the fun little quote in episode 40-something where Duo suggests that after the battle they go out and celebrate with some expensive champagne.
*Author's Note* Yes, I know there's no way he could actually be drunk (though Angel disagrees), but it would explain a lot. ^_^