If u put things that way, alot of things in video games dont make sense, yes, you dont see cloud getting any scratches throughout the game when he gets slashed, but in other games, you can play as a character and accidently fall into a bottomless pit, then all of a sudden appear back on the ground with just HP taken off.
a LOT of things in video games dont make sense and doesnt syncronize with real life, you would think a LARGE bahamut zero blast from outer space should really destroy the whole battlefield while playing, but does it even make a hole in the ground? No, it just does damage; however, even though it doesnt make sense, its still not considered an illusion, its just a video game.
Face it, things in video games just dont make sense if u try to compare it with real life, so if it doesnt make sense or is too unreal, it doesnt mean its an illusion, it just means its a video game.