Is nepeta actually mentally ill, because ive seen a post saying that nepeta was mentally challenged but the only time I recall anything being mentioned in the comic was when Karkat had called her "retarded" maybe it's a thing people deducted from the way she acts?

Karkat called her autistic not retarded. Which could have just been him being a dick. Whether or not you believe Nepeta is mentally ill is up to your own interpretation and headcanons