It's not hallucination and it's certainly not new, or even particularly newsworthy. Spatial Disorientation is well researched and documented. The USAF has volumes of training materials covering known visual and vestibular sensory illusions. From the simple one that makes it seem like you're climbing when you're really just accelerating, to complex rolling excess-G illusions that occur when pulling G's while looking back over one shoulder, these are well known and at least military pilots are specifically trained to recognize and counter their effects.
There are a few classes of spatial disorientation. Recognized, unrecognized, and recognized/incapacitating. Of the three, the second one (unrecognized) is the most deadly. Recognized/incapacitating is next, and it's only less deadly than unrecognized when there is either a second crewmember who is not incapacitated, or if there is an ejection option available before it's too late.
I don't know a single pilot who has not experienced spatial disorientation at some point during their careers, and I've talked to people who have had all three types at some point in their careers. I've also read accident reports where type 2 or 3 spatial disorientation led to a fatal mishap.
So it's not new, and it's not even very newsworthy. The reaction of the general public to this sort of information however, when read without the right background training, is exactly why this report was not initially released outside the flying community. It only says things we already knew, but it added some stats to things we couldn't put numbers against.
So when someone who doesn't know what this stuff means reads the report, they wonder about these hallucinations all pilots have. It doesn't really help things, and the only way to address the public's hysteria is to attach what I'd estimate to be around 20 hours worth of academic lessons and video lectures to the basic report in order to show that this stuff isn't really all that new. It seems like it's mostly just more documentation and research into stuff we already know about flying.