I think there is a difference, and it's intent. Illusionism is an a deliberate act to conceal the removal of agency. That's not necessarily bad -- I do not think the removal or limitation of agency is inherently bad in games -- in fact, most games require strong limitations on agency to function. D&D, played in the traditional way where the GM preps ahead of time and owns the setting the players explore, quite often encourages techniques like Illusionism so that the work done by the GM is not overwhelming. There are reasonable applications of Illusionism in D&D, although I personally avoid them. Regardless, Illusionism is always a deliberate act.
'Making things up,' on the other hand, may be a deliberate choice to remove agency, but it's very, very hard to conceal. If you're making things up so that you're maintaining a hard level of control over the fiction such that you're engaged in a railroad, or a playground version of nuh-uh, then, yes, this is both an abusive and deliberate act to remove agency, but it's also not concealed. However, you can 'make things up' using a strong set of principles and constraints and not do either of these things. You can 'make things up' in a way that doesn't remove any agency and instead promotes it (just like you can run traditional D&D in ways that promote agency, this isn't a competition). Illusionism can never do this -- it's a deliberate removal of agency.
So, yeah, I don't think the difference is either murky or not worth discussing. There's a clear line in how the technique function, regardless of whether or not you're invoking degenerate and bad faith play for either. If you stick to good faith play, there's still a difference, and, yes, I think Illusionism can be used in good faith -- it's a tool to reduce GM prep. I think overuse moves to bad faith, regardless of motivation in any specific instance -- it's a tool that creates railroads and hides the tracks if overused. Occasional use, especially as a buffer to use when you need bridge content because the party has either thrown you a loop or you didn't have enough direction to prep the next leg is, to me, just fine. I don't need to tell players that this encounter chain was going to happen no matter what because I need more time to prep where they just decided to go. In that case, orcs in the Dark Wood are what you get.