Hi Crazycatlady,
Welcome to the forum.
It sounds horrific, that you were burned and lost a nipple. I have a friend who lost the tip of his little finger a couple of years ago, in an accident and he always talks about the pains in the 'missing' part. He says it is particularly bad in cold weather. Phantom pains occur because your brain does not accept that a feeling part does not exist any more. I guess it must be so hard to have a constant physical reminder of what you went through, on top of all the psychological stuff.
Have you had/ are you getting therapy? Also a pain clinic might be able to help. They are familiar with phantom pains and I believe there are some types of pain relief specifically targeted at that. Although it is called 'phantom' pain, doctors now understand that the pain is very real. It is the limb - or in your case - nipple that is 'phantom', not the pain itself.
You are most definitely not crazy. You have a very good reason for struggling with this, but I do think it could get better with therapy addressing your original trauma.
Best wishes
Lucy x