Did giddy derive from a word meaning foolish or mad(crazy) in Middle English?
Yes. Check out http://m-w.com
According to this site, it does. Also, one of its more distant ancestors is the Germanic *gudigaz, "possessed by a god. Hmmm, I’d guess Gudegast is also descended from that root…
Giddy is like saying “goddy.”
Both God and giddy come from the Proto-Indo-European root *gheu- ‘to invoke’.