Or, we could incorporate the phenomenon within a physical model by first denying that it exists and then explaining the mechanism which caused you to believe in it, and talk about it.

It still feels very important that you haven't actually explained this.

In the case of psychic powers, I (think?) we actually have pretty good explanations for where perceptions of psychic powers comes from, which makes the perception of psychic powers non-mysterious. (i.e. we know how cold reading works, and how various kinds of confirmation bias play into divination). But, that was something that actually had to be explained.

It feels like you're just changing the name of the confusing thing from 'the fact that I seem conscious to myself' to 'the fact that I'm experiencing an illusion of consciousness.' Cool, but, like, there's still a mysterious thing that seems quite important to actually explain.