I'm not exactly sure how detect illusions works and what all it dispells, but I'm rather certain it simply works like the spell detect illusion. I dont think it will dispell images or misleads, but it will dispell mirrored image and all kinds of invisibility. And yes, to activate this ability, simply look for traps. I think that there is a certain thief in a certain astral prison who detects illusion and becomes very annoying. Unfortunately, I think tactics patched this.
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