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A Palatine woman charged with killing her 2-year-old daughter ”was legally insane” at the time, a psychologist testified Thursday in the Skokie branch of Cook County Circuit Court. Karen Smith, a psychologist with the Cook County Psychiatric Institute, testified that Linda Hood, 35, was suffering major depression on Aug. 6, 1986, the day her daughter, Michelle, was choked with a cord and held under water for several minutes. Hood was aware of what she was doing as the child was attacked, but it was ”as if she were watching someone else perform the act,” said Smith, who has examined Hood three times since her arrest. The trial, in the courtroom of Judge Gerald Rohrer, is scheduled to resume Friday.