It's not hallucinations and it's not the real Mugo either. If you read back to the previous chapter, they were the other and lower evil spirits in the mountain. If you read further back, you'll find that the Well God told MC there's a barrier around Mugo's mansion. MC could walk around without worry cuz he was protected. The second he set foot out of the gates without Mugo he's out of his territory and protection.
Since Mugo is considered a god despite being evil, mountain evil spirits always wanted to get a piece of god's sacrifice. In spiritual world, once you tapped in their frequency and didn't shut yourself properly, you're like a beacon. In MC's case, he's a running beacon and they flocked to him.
To make him submit to their power and wiles, the mountain evil spirit took Mugo's form as shown in the prev chapter. MC slowly became less defensive when he saw Mugo's face. Still, he's being coerced, and although he didn't like that one bit, he couldn't do anything. （/TДT)/
Wait... i don't understand the grape scene... was it real or just hallucinations? And who wer3 they? Why one of them looked like Lord Mugo