If time was just how we viewed the universe, and it didn't have an effect in "real" life, it wouldn't be an illusion by your definition. It would be the norm for how we interpret it.
As to the subjective nature of time, I was thinking this might be a, for lack of a better word, illusion, but not in the nature that it isn't the norm. Just that the way our brains store information it appears subjective. What I mean to say is that the "speeding up" and slowing down of time might be caused by our memory.
When we record more data on whats happening around us, usually this increased memory storage is caused by adrenaline I think it was, if you ever saw that one study on rats where the one that was injected with adrenaline could remember it's way through a maze better.
But anyway, the increased data storage might make us, when we think back on the moment, think that time was going slower, when in actuality it just had a higher data storage per second ratio. Or something like that.
I should probably arrange this speculation so it's a bit easier to understand, but I'm too lazy for something like that.
EDIT: There, I spaced it out a bit.