Don't let the title confuse you. I'm not mad. Stark? Maybe. Raving? Probably. But mad? No. I'm totally....mostly sane.
So, recall that Dreams are very much real in the chronoverse. If they are strong enough dreams they can take shape and affect the world around them.
Masa, Mune, Doreen, and the Lagoonates from CC are such dreams.
Also, it has been mentioned that we are all a part of the Planet's dream.
My theory is that the reason Lavos exhibits strange temporal behavior, is that it is not part of the dream.
The world we see is part of the dream. All things living in our world are parts of the dream.
Lavos is an outsider. It came from space, outside of the Entity's influence.
As the world is part of the dream, the Gates can be considered moments of lucid dreaming that allow parts of the dream to exit the normal 'dreamspace' to move forward of backward to different memories of the dream.
The dream we are in exists on a separate temporal axis from the Reality that the Entity and Lavos inhabit. Not disconnected from it, but not normally affected by it.
'Lavos space' is actually more akin to how a Dream perceives Reality.
Lavos' appearance marks the beginning of a nightmare for the Entity. Lavos' arrival was a traumatic event in Reality that caused ripples in the Entity's dream, and the frantic panic state forced the Entity's consciousness to exert itself on the dream, creating Gates as it tries to understand what is happening, why, and what to do about it.
There are a few things that this means for us.
Lavos' arrival on the planet, and the eventual apocalypse, the death of the planet, may actually be happening very quickly. We as parts of a dream that intersect Reality but are not part of it experience the death of the planet very differently from the planet itself.
Lavos almost never directly contacts humans or does anything in the world at all really. The reason for this is that Lavos is not keen to the dream's mechanics. Rather than manipulating time as we know it and having strange pocket dimensions, Lavos is actually ignorant that the dream is happening until parts of the dream interfere with it directly.
Understandably Lavos is confused by this, and attacks the strange things it is seeing. Lavos is not extracting DNA from US so much as it is siphoning something of import from the Planet, which is killing it. The planet's fear of this echoes in the dream, which is how we understand it.
Lavos does not directly understand the dream, but it is capable of understanding it and interacting with it. You can sort of imagine we are swirls on the surface of a soap bubble... our whole world is. We never experience the interior of the bubble, the volume of air inside it, not normally. That voluminous space inside and outside of the surface of the bubble are Reality, and we are merely the image on the surface.
Lavos penetrated that bubble from the outside, and is now inside with the Planet, where the Entity exists and has influence. We experienced this incursion as Lavos crashing into the Tyrano Lair. (This is probably one of the few moments we experienced alike with the Planet)
Being inside the bubble, the Entity and Lavos are capable of affecting its surface.
Lavos for the most part doesn't notice the surface, as its goal lies in the volume, where the Planet is.
Being that Lavos and the Entity are both capable of influencing the dream on the bubble's surface, the Entity tries, in brief moments of panic or lucidity, to enlist help from its dream. (Just as a person having a nightmare would seek help from a dream character)
1999 is the realization that the Planet is being attacked, 2300 is the understanding that it is dying. 65mBC-1000AD are for the most part, just different parts of the dream. Dreams are discontiguous. Dreams are mutable.
The Frozen Flame is one of the few direct interferences Lavos and the dream have on each other. Lavos contacting the dream changes the dream; changes us.
The dream becomes aware of Lavos through this, and Zeal is born. Being aware of the Reality outside the dream, though not understanding it, Zeal tries to harness Lavos' power. Lavos is understandably startled when what seemed like an image on a soap bubble, exerts a Real effect on it, and so it destroys Zeal.
So too does it destroy Crono. Crono has exited the surface, (due to the Entity's incredible strength of dream) and entered Reality, to attack Lavos.
I'm sure there's plenty wrong with this theory, but it was an interesting thought I had. It changes things a lot when you consider that instead of Lavos being the exception to logic, we are in fact exceptional to a fictional logic dreamt up by a dying planet whose ken is beyond our capacity to understand.
We are extraordinary dreams of such urgency that we become manifest, if only for the briefest time. It didn't enter our space, we left the dream and experienced Reality for the first time... but we couldn't comprehend it because the common sense of that world was alien to us. So we saw it as strange time outside of time, when it was our time that was strange instead.