Suppose evil is an illusion. Then the illusion of evil is itself evil, a non-illusory evil, whence follows the falsity of 'Every evil is an illusion.'
Or is that too quick? Then permit me some exfoliation.
1. Every evil is illusory. (Assumption for reductio ad absurdum)
2. The illusion that there are evils is not itself an illusion: it is real. (See subargument A infra)
3. The illusion that there are evils is itself evil. (See subargument B infra)
Therefore
4. There is an evil that is not illusory, namely, the illusion that there are evils.
Therefore
5. (1) is false: it is not the case that every evil is illusory.
Subargument A: The illusion or false seeming that there are evils, qua false seeming, is either nothing or something. If nothing, then it cannot be the case that every evil is illusory. (After all, evil must have some entitative status, however exiguous, if 'illusory' is to be predicable of it.) If, on the other hand, the illusion or false seeming that there are evils is something, then this false seeming, though nonveridical, exists in people's minds and is as real as can be.
Subargument B: The illusion that there are evils, which subargument A shows to be real qua false seeming, is itself evil because it is false and deceptive.
One of the metaphysical problems of evil is that, while evil cannot be an illusion, as I have just demonstrated, it cannot be fundamentally real either, as such luminaries as Augustine and Aquinas clearly saw. Evil has a strange 'in-between' status, an ontologically derivative status. This is what the classical doctrine of evil as privatio boni is supposed to capture. That doctrine, though, we have seen to be problematic. But progress has been made in better understanding the question, What is evil?