TL-DNR This is more of an Evil Queen (not Mad Queen) character arc/reveal, and the remaining conflicts/resolutions will reflect that.
I'm trying to make sense of her burning of innocent common folk (other than for merely The Visual Spectacle) and to figure out what it portends for the last episode.
She burned the Tarlys (even though they had surrendered like the Golden Co.) because they refused to submit to her rule. For her, failure to bend the knee is completely justified ground for execution. The people of Westeros will all soon know about Jon's greater claim and all of them will lean toward refusing to bend the knee to her. In her mind that is the most natural flow of events because even her most trusted advisors (Varys, Tyrion, Jon) have already betrayed her in various degrees after obtaining the revelation R+L=J. Burning and killing tens/hundreds of thousands of Kings Landingers is her last ditch effort to force the people to submit to her (just as burning the Tarlys made all the last standing Lannister loyalists in that battlefield to immediately get down to their knees). In a sense, the Battle at Kings Landing might have been less a battle against Cersei + Golden Co. + Iron Fleet, and more a battle for the submission of the westerosi people to her supremacy.
This assumes she hasn't (or hasn't yet) become a Mad Queen like her mad father. I'm trying to find her internally consistent and organized thought patterns which would lead her to slaughter innocents. It looks less like Madness at work, and more like tyrannical entitlement/exceptionalism pushed to its logical limits/consequences. This is not to excuse or lessen her guilt, but the opposite because a mass homicidal tyrant lacks the excuse of Madness since the culprit is an internally consistent and lucid and even rational but Evil heart. The Mad Queen we feared might really be an even worse Evil Queen. Daene (and Stannis before her) is Palpatin/Anakin rolled into one, except the arc is more poorly developed than even Anakin's and the reveal of the Emperor is done at the very end of the "trilogy". Jon (and Arya) are Padme/Obiwan/Luke rolled into two.
You might retort that Evil Daene (as opposed to Daene with a short temper or Daene with some rough edges or Daene who boldly fights back from wrongs done to her) is completely inconsistent with the Daene of the past 7 and 2/3 seasons. Perhaps so. Or perhaps she is an unusually charismatic, in some ways admirable person who had never been pushed to reveal the full extent of her unlimited lust for sovereign power. It might have been there all along, in many ways hidden even from herself underneath a more palatable, manufactured persona of oppressed survivor who became the beloved breaker of chains. It's hard to think of an instance when her tenderness or tolerance was directed to anyone who opposed her primacy or whose position did not warrant a more prolonged, strategic effort to win over to her side.
Daene could show herself further in ep. 6 to be this Evil Queen by actions such as threats of more slaughter of innocents, threats to Tyrion & Jon disproportionate to their actions, plans to make Sansa literally kiss Daene's muddy boots under threat of death and the destruction of Winterfell, plans to destroy kingdoms displaying less than full and immediate submission. If this happens, the only recourse might be Jon/Arya killing her, a coalition of Northern & Vale & Riverland & Stormland and other forces (gathered by Varys' letters) fighting the Unsullied & Dothraki, Arya using Daene's face to get close enough to Drogon to drive a spear deep into his eye, or Bran using his warging powers from ep. 3 on horses/cattle to stampede them over a flying Drogon toward sharp KL rocks.