I read in a alteration skill level book in the game that the difference between Illusion magic and Alteration magic is that Illusion magic is all fake, it doesn't actually change things in the world just what people feel/see. Alteration on the other hand does change real stuff in the world.
That's really the most important thing to remember when it comes to illusion spells. There seems to be a mistaken idea that an invisibility spell
actually makes you invisible. It doesn't. It only diminishes others'
perceptions of you. In essence, you're not casting it on yourself at all, you're casting it upon those AROUND you.
So, while it may be kind of a pain in the posterior that the spell "breaks" as soon as you take a swing at someone, it only makes logical sense. Since you're less making light pass through yourself, and more creating a "blind spot" in the range-of-vision of nearby NPC's, you'd better believe that the ILLUSION is broken as soon as you take a poke at one of them. I don't care HOW effective the spell is...if someone is standing directly in front of you and swinging a warhammer at your face, chances are, you are going to become aware of them and what they're up to.
The sad thing is, if you could mow down enemies with impunity all while they run around confused at what's happening, I just KNOW some chowderhead would pipe up about how "unrealistic" it is that NPC's simply wouldn't notice an aggressive broadsword swinging around in mid-air of its own volition. There's really no winning with some people.