delusion = "a false belief or opinion; a mistaken or unfounded opinion or idea" illusion = "something that deceives by producing a false or misleading impression of reality; the state or condition of being deceived" Basically, delusion comes from the subject itself, and illusion is something perceived by the subject. (1) The delusion in this case, comes from men's own opinion (and is generally rgarded as false). (2) Though it is his own opinion, it is something that he sees and as a result is able to form an opinion about it.

xademloosx's answer is pretty accurate, I think. The main difference is that delusions tend to involve false beliefs, whereas illusions tend to involve false sensory perceptions. Personally, I think that sentence (2) above ought to use the word "delusion", rather than "illusion", since it describes someone's beliefs, rather than their immediate sensory perceptions. Generally, I prefer to limit the word "illusion" to cases which clearly involve misjudgments in sense perception (such as cases of "optical illusion", and so on). Having said all that, you could probably swap these two words around as you pleased in most sentences, and very few native English speakers would notice any difference!