This is actually one of the best songs in the show because even though Sancho isn't mad like his master, he does what he does out of nothing but pure love. Even though he is aware that his master no longer sees things clearly, being with him and being of service to him is a pleasure for Sancho in itself.
He just likes hanging out with his friend. He's just saying that you could put him to all kinds of different tortures; he doesn't have an ulterior motive (to contrast with Señor Quijano's family).
@Bitemis Exactly! He's saying it makes no sense to anyone and it doesn't have to. He just enjoys being around someone who believes that there is so much good in the world and in humans that is worth fighting for. Although, in the actual book by Cervantes, Sancho was a piss poor farmer who was promised by Don Quixote that he would govern an island after his squire duties were complete. I love the humanity in the musical.
