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While True SEEING only affects magical illusions, true SIGHT (level I-forget mage spell), detects *everything* that makes a character harder to see. This includes, all illusion spells, HiS, Potion of Invisibility, and anything else you care to name.
Judging by the rest of the spells they cast, Yuan-Ti are mages, and therefore cast Mage spells. Thus, they are meant to see your swashie.
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