That's mentalstate. Under normal circumstances, the main thing which causes it in imms, is fieldtesting mobs at low health. Whenever you get the message "You wish your wounds would stop BLEEDING so much!", mentalstate goes down slightly. Players hardly notice this since they don't get that message so often, or if they do, they die. But it's common for imms to suffer a lot from it. There are other things which effect mentalstate, too, such as poison and hunger (but hunger only affects it for Lv <50).
You can fix mentalstate by doing: "mset self mentalstate 0"
If that all doesn't help, then it sounds like something bizarre is happening which isn't part of stock SMAUG.
Ah, right, mentalstate. That's the term I was looking for. As I said we tried everything to fix it in-game; eating, drinking, sleeping. His char health was perfect otherwise. I went into his pfile to look at his mentalstate and it was at -43, so I changed it to 0. Still not sure what caused it or why it couldn't fix itself but problem solved now. Thanks.
Just remember that if you make changes to a pfile while the character is online, the changes will have no effect as they'll be overwritten the next time the character saves so only make changes directly to a pfile of an offline character and use mset (where possible, like in this case) for any characters that are online.