Locate an old hag usually found on Tarragon Street, she will offer you something for 5,000 gold, give her the gold and receive a ruby-topped staff. If she doesn't offer you anything, run in and out of the room to trigger her offer.
Next, kill the silver guards in the castle or the master necromancers in Ilandrama Library, or ask someone to kill the neo-mindflayer or master necromancers for you, to acquire some vials of runestone powder. You can also buy them for 23,000 gold, but this should be a last resort.
Next, go to an intersection and hold and use the staff, an emote will move a direction, follow that direction to the next intersection and then use the staff again, this will show whether the Illusionist is located between the 2 intersections or still ahead of you. Rinse and repeat this till you can lock his location down to a set area, then try moving all directions in those rooms until you pass through a wall.
Once found you have 2 choices:
Please note that you must have detect invisibility to see the Illusionist to give him the staff or to kill him
Rewards at lvl 58 for giving him the staff:
You give a ruby-topped staff to a hidden illusionist. A hidden illusionist shakes his head, as though pulling himself out of a daze, and refocuses his eyes. 'Thank you, Vasad.' a hidden illusionist says to you. 'I was wondering where I'd left this.' For seeing through a powerful wizard's devious illusions, the Powers have granted thee a Mark. You have been granted the Mark of Illusion! You gain 44 practices! You gain 522,000 experience points!