Yes, most people live in a world of illusions or delusions.
Their choices are guided by their illusions or delusions.
Yet they believe these decisions are made freely and are a product of their independent actions and perfectly justified by their "free will" and their "Self".
They are deluded into thinking their life decisions are made by them as an independent unity, a "person" with free will.
They are deluded into his illusionary belief by the Ego Mind (which may also be called such names as "Self", "Free Will". or "Self Identity").
As a "sentient Human Being" and "independent" of all others (outsiders) they live in the mistaken perception of their independence from other "outsiders".
As I said the cause of his delusion is their Ego mind and the illusion of "apartness" from others it generates.
Their Ego Mind, living alone in it's perceived solitary world, teaches them this illusion of their separation and uniqueness as an individual from their first sense perception as a child.
Now people can learn by meditation or just by a process of understanding that their true nature is NOT a wholly separate individual but is, in fact, a part of an interrelated and interdependent collective.
Seeing this fact can break that illusion or separation generated by the delusionary perception of their Ego Mind of separation.
Free of that delusion created by their Ego Mind as a separate identity they can then go on to further develop their understanding of their true nature
With that understanding they can free themselves from the assumed illusions and delusions that previously guided their life.
That delusion is not a "Mahayana Problem", it is a delusion created by the misperception of separation generated by their deluded Ego Mind.
P.S. Freeing yourself from the control of your deluded Ego Mind's misperceptions can also be called "Passing through the first Gate of Understanding".
Shame on you Shakyamuni for setting the precedent of leaving home.
Did you think it was not there--
in your wife's lovely face
in your baby's laughter?
Did you think you had to go elsewhere (simply) to find it?
from - Judyth Collin
The Layman's Lament
From What Book, 1998, p. 52
Edited by Gary Gach