There is a faction in Total War: Warhammer II, namely Drycha. Drycha can control elven units despite this making no sense in lore. They are given a debuff called glamour to explain this away, supposedly the elves are enchanted to think they fight for Ariel, when in reality its Drycha that commands them. I am explaining this otherwise utterly unrelated piece of gaming trivia because i think the binding of Shadowgave works in similar way. The dwarfs bound him and are making him see things. He appeared to prostrate himself to Dum as if it was a herdstone. I just assume he sees the Dum dawi as some kind of utterly chaos blessed beings and considers it his personal duty to make sure they continue to exist.
I suspect this may not be an illusion so much as dwarven runework altering and solidifying an extremely twisted reality into a deceitful form. Making order out of chaos is definitely a runework thing.
If it was affecting the world as Morghur does, Borek would be a Chaos Spawn by now. He doesn't exactly have an "off" setting for his aura.
Well, since you asked: Much is still unclear
Breaking reality is sort of a general thing for extreme-high-end Chaos entities, it's not unique to Morghur. Moreover we're in Chaos Wastes, where it's easier to break already thinned reality, and Mathilde still didn't met Morghur personally to know how much he should affect surrounding world in such conditions.
Nobody else is going to come this far north. Any observations we make now are all anyone's going to have to go on when they try to figure it out.
I suspect looking too deeply at Morghur is going to give you bad case of Morrslieb madness.
Morghur sees visions of the terrible future, and (when he manages to do anything resembling a plan) does his best to make sure it comes to pass.
Borek himself, someone who clearly knows far more about this situation than we do, believed they were lost. He gave us an excuse, told us to tell the rest of Karaz Ankor what happened, asked the ancestor gods for forgiveness, then left. If the dawi of Karag Dum believe Karag Dum is lost, I see nothing we can do other than anger the reality destroying demigod sitting on a mountain of bones of people who have angered him.
He doesn't in Canon, but it's far from impossible that the dwarven runesmiths have made one.
