Illusion doesn't imply it's unnecessary. Humans (and animals) had a much higher probability of survival as individuals and as species if their experiences felt more "real and personal".

If it has a functional purpose then it's not an illusion.

That is in interesting viewpoint. Firstly, evolution on long time scales hits plenty of local minima. But also, it gets semantic in that illusions or delusions can be beneficial, and in that way aid reproduction. In this specific case, the idea is that the shortcut of using the model of models as self saves a pointer indirection every time we use it. Meditation practices that lead to "ego death" seem to work by drawing attention to the process of updating that model so that it is aware of the update. Which breaks the shortcut, like thinking too much about other autonomous processes such as blinking or breathing.

I'm just not sure what the label "illusion" tells us in the case of consciousness. Even if it were an illusion, what implications follow from that assetion?