The Gift (Blake's 7 story)
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It was published in Fire and Ice #3.
It is a sequel to the story Deliverance. They may have been written by the same person. Or not.
Reactions and Reviews
The sex scenes were great fun, but when the "Blake is insane" part started, she definitely lost me. 
Don't let Joyce's excerpt [in issue #16 of Rallying Call] keep you from reading that Pat Terra story The Gift: FIRE & ICE 3) if you have or can borrow the zine. I thoroughly enjoyed the earlier part of the story. A well-muscled, half naked Blake chained to a wall? Yum! While Avon walks around covered in leather and studs and hostility. Guess who ends up dominating whom in the scene that follows? As I remember, it's after they start talking about insanity that you can stop reading. This writer is a former B/A person who converted to A/V? Talk about needing a shrink! 
The Pat Terra story you described ("The Gift" in Fire and Ice 3) is even odder when it is considered as a sequel to "Deliverance" in Avon Calling 2. Do you know whether the first story was by the same author? I kind of assumed that the point of both stories was the kinky dominance/submission stuff, and the reason for making Blake outright insane in the second story was just to give Avon a chance to be on top. Ordinarily I like that kind of thing (the dominance games, that is, not the insanity), but neither of these stories quite did it for me, and I'm not sure why not. Maybe the author really, in her heart, preferred A/V all along, and only wrote B/A because she thought it would be more popular?
so, the first fic in the zine is also one of the ones i really don't like. i was was willing to stagger through the following descriptions of avon - 'the Alpha Master', 'the black-clad Alpha', 'the black-garbed Alpha' (one per paragraph in the first three paragraphs - and it does not stop. to make matters worse when blake arrives he's described as avon's 'alpha master' too...) - i don't like this, but i've been trained by less-offensive epitaphs, like 'the burly rebel', so i was willing to ignore it if ignoring it meant i could enjoy a fic where avon buys blake as a slave (yes, please).
alas, what i could not ignore was the plot, which is basically that s2 avon (in a relationship with blake) assessed blake as totally mad due to his crazy rebel ways. blake agreed to go have therapy if avon helped him with star one, but wimped out because of he's afraid of therapy after his mindwipe - and that's why he didn't come back after star one :( and... it just gets worse and worse because blake is like 'I'M SORRY AVON I AM MAD I JUST REALLY DONT WANT TO GO' and cries everywhere...
strangely, apart from this the dialogue is ok, and there's some bondage type sex - i approved of all of this. but blake isn't mad, and doesn't cry. so after a few pages of this business, i skipped the rest of the fic.
also - i know it's a minor qualm, but the beginning tells me that avon was also fucking cally (now dead because this is series 4). again, this seems to be totally extraneous to the plot (unless it comes back later in a bit i haven't read) or the important relationship depicted in this fic. rather than being relevant, it's just a thing presented as unavoidable fact i.e. we all know avon was fucking cally, so it'd be weird not to mention it.
no, it wouldn't.
and no, he wasn't.probably.