I doubt it.  From newspaper stories, it looks like the Central Lunatic Asylum was established in 1870, well before James C. Talley was declared a lunatic. However, it does appear he had some sort of mental disability from birth. In the census records, he's always living with a relative, is never listed as having a job, and he never married. 

Anyway, lunatics were segregated back then. He was white, so if he had been institutionalized, he would have gone to either the Eastern Lunatic Asylum in Williamsburg or the Western Lunatic Asylum in Stauton.  The Central Lunatic Asylum at Fairfield was for blacks only.

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