late 14c., "deranged, insane;" also "foolish, silly, unwise," from fonned, past-participle adjective from obsolete verb fon, fonne (Middle English fonnen) "be foolish, be simple," from Middle English fonne "a fool, stupid person" (early 14c.), which is of uncertain origin but perhaps from Scandinavian. Related: Fonder; fondest.
Meaning evolved via "foolishly tender" to "having strong affections for" (by 1570s; compare doting under dote). Another sense of the verb fon was "to lose savor" (late 14c. in Middle English past participle fonnyd), which may be the original meaning of the word:
Gif þe salt be fonnyd it is not worþi [Wyclif, Matthew v.13, c. 1380]
late 13c., "foolish, ignorant, frivolous, senseless," from Old French nice (12c.) "careless, clumsy; weak; poor, needy; simple, stupid, silly, foolish," from Latin nescius "ignorant, unaware," literally "not-knowing," from ne- "not" (from PIE root *ne- "not") + stem of scire "to know" (see science). "The sense development has been extraordinary, even for an adj." [Weekley] -- from "timid, faint-hearted" (pre-1300); to "fussy, fastidious" (late 14c.); to "dainty, delicate" (c. 1400); to "precise, careful" (1500s, preserved in such terms as a nice distinction and nice and early); to "agreeable, delightful" (1769); to "kind, thoughtful" (1830).
In many examples from the 16th and 17th centuries it is difficult to say in what particular sense the writer intended it to be taken. [OED]
By 1926, it was pronounced "too great a favorite with the ladies, who have charmed out of it all its individuality and converted it into a mere diffuser of vague and mild agreeableness." [Fowler]
"I am sure," cried Catherine, "I did not mean to say anything wrong; but it is a nice book, and why should I not call it so?" "Very true," said Henry, "and this is a very nice day, and we are taking a very nice walk; and you are two very nice young ladies. Oh! It is a very nice word indeed! It does for everything." [Jane Austen, "Northanger Abbey," 1803]