Last night I sat at a table at 5nl. There was a maniac running 99/65/1.5 for the session and a 3bet stat of 40%....basically if you had TPGK+ you could get the stack in with a + expectation over the long run. He had $30 in his stack when I joined (he had some lucky hands for sure), got up to $42 and proceeded to loose it all over about an hour.

So I will have to elaborate...
I agree that its best to tighten up against these players, remove bluffing from the arsenal and value bet them...

The problem I had is that the rest of the table saw he was donating and they LOOSENED up to play more hands against him.
So then, what do we do??

Players often 4bet him b/c he would 3bet with shit and call the 4bet with shit....

I can recall one hand where I had AQs from EP, I raised it, the maniac 3bet me and I was happy, I thought "great, I'll play heads up against him with AQ in a 3bet pot.."
Then a player after him 4bet him, followed by a caller and it came to me and I folded my AQs. The hand never went to showdown so I don't know what they all had.

I know that the others were lowering their starting requirements against him and my AQs may have been best, but should I have taken a hand like that into a 4way pot where 1/2 my stack for sure will be in the pot by the turn?

Would it have been better to just slightly loosen up my starting hands to play him? Or stick to my guns and wait for the right opportunity?