Unfortunately he wasn't hallucinating
He was so attached to the guy after all that trauma it's natural that he forgets things especially since 1.he's apparently been dead for awhile now and 2.the Hyung visual created by the demon is how he remembers him so not exactly the same, eventually how the Hyung looked vs how he views him is distorted especially after the depressive episode
He was ready to die

I liked the main story and main couple but the side stories wasn’t needed imo. Like why fall in love with that human? I wasn’t expecting that. And then when the guy was ruminating on and on about how he could barely remember his hyung it made me wonder hmm what if he hallucinated bending his hyung over? We already know he’s not right in the head so it wouldn’t be far off. Anyways just my interpretation. This was a great quick read, lots of funny moments but that side story was not it. They could’ve gave us a quick little one, two update and then focused on the main couple.