It's important to distinguish between different senses of illusionism about consciousness. One kind of illusionism rejects the claim that consciousness has certain properties (ex. qualia; immateriality; etc.). Another kind of illusionism may reject an entire conception of consciousness. I believe Dennett's position falls into the latter category.

Interpreting Dennett's position in favorable terms, illusionism does not imply epiphenomenalism because only a certain conception of consciousness is illusory. Namely, the idea that consciousness is a centrally-located "Cartesian theater" that integrates all sense-data into a unified perspective and subsequently produces an action. In Dennett's view, it's more scientifically accurate to conceive of the mind as a coordinated collection of "homunculi". Thus, its still possible for the mind/consciousness to have causal powers as long as it not understood in Cartesian terms. Thus, Dennett's illusionism is compatible with the rejection of epiphenomenalism.

I think people have difficulty with Dennett's position because it seems to undermine the idea that we are responsible moral agents. The concern is that no center of consciousness implies no capacity for intentional action. It's unclear whether his books on free solve some of these conceptual problems created by his critique of the prevailing conception of consciousness.