It's true, Chickie, that "illusion" is most often associated with visual sensory input. But it can also be used in a figurative sense in the same way that "delusion" is used. For instance, you might say, "Law creates the illusion of order."
But what I'm really looking for is something that captures the idea of beliefs which are the result of desires. For example, in the film The Matrix, the character Neo says at one point that he doesn't believe in fate, and when asked why, he replies, "because I don't like the idea that I'm not in control of my life". His belief here is dictated by his desires rather than what he perceives to be true. This is the sense in which I would like to use the word "illusion".
As for whether or not Freud consulted his dictionary in this case, I think that if there really is no other word that captures this idea, then "illusion" is a better word than any I can think of to adopt for this usage - especially with such a nice counterpart as "delusion" to play it off of.