Alo-Bridget Namoa, 19, is charged with possessing an item connected to a terrorist act and recklessly collecting documents connected to a terrorist act along with her 19-year-old husband, Sameh Bayda.

Police allege she was found with a tactical hunting knife and a Shahada flag in her handbag as well as instructions for making a bomb.

During a bail hearing in Central Local Court on Monday, her barrister Zaid Khan tendered evidence showing that Ms Namoa is severely mentally ill and her health has deteriorated since entering custody in February.

A psychiatrist said Ms Namoa, who is of Tongan heritage and converted to Islam after school, has been suffering hallucinations and schizophrenia.

In one instance, she told prison doctors: "I hear voices. It tells me to hurt people but I don't."

Ms Namoa, dressed in an orange prison jumpsuit and black hijab, laughed, pulled faces and clapped during the proceedings.

The court heard that she has told prison doctors: "The toilet talks to me, it makes me laugh" and "I see angels, they are my friends".

She also said: "I keep thinking about the things I have watched on the phone. The beheadings and all."

Ms Namoa laughed and shouted "woo!" when Crown prosecutor Michelle England read out another comment to doctors in which she said: "My favourite one [is] when the rocket blew his head off, his intestines and all."

She laughed as Ms England detailed material allegedly found on her phone including "extremely violent" war scenes and support for the San Bernadino shooting in America.

In one text messages with Mr Baydah she allegedly wrote: "I want to do an Islamic Bonnie & Clyde version on the kafirs haha ... like ASAP".

However, Mr Khan argued that the text messages show Ms Namoa's immaturity and suggest the pair were filled with bravado or a "romanticised notion of these two offenders against the world".

The court heard Ms Namoa has been given the highest classification in Silverwater prison due to her terrorism allegations and she is kept in permanent isolation with limited health care.

She spends 22 hours a day in a single cell and two hours a day in an isolated caged exercise yard.

A bail decision will be handed down on Tuesday.