It is not clear to me if the jury would buy the defense. My understanding is that Holmes is quite mentally unstable and had a history of instability before the shooting. He does, however, seem mentally fit to stand trial which would mean to me that he would not be able to plea insanity.
Although I am not an expert, it seems like a fair use of the law for him to offer that as a defense. It is possible that the jury will reject it anyway because people are so filled with anger and other emotions about what happened. But from what I can gather, it is not clear that he is fully a sane person.
For respects to what benefits him the most, that should be their approach. It's going to fail miserably though, initial police reaction to him was that he's nuts but as time has gone on more and more people have realized he's a monster but not a crazy one. Legally it's the right approach for him and his representation, but he's going to get what's coming to him.
Juries hate the diminished capacity defense and he'll end up with the death penalty faster than if he just plead guilty. If his lawyer has his best interest in mind he would make a deal for life in prison. That way he can just rot and hopefully we'll all forget about, soon.