Here's an article about an interesting modern theory that purports to "prove" that "reality" is not just an illusion. It's a bit of a complicated appeal to the basis of language, but makes some good points. However, I think there may be a fundamental flaw at the very root of the argument.
It still starts from the assumption that the first beliefs have some basis in an objective external reality. On the basis of that the whole structure is then built up. But what if those first few beliefs are actually totally subjective and not based on any common "external" stimuli? Then I think the whole argument falls apart. In other words, you cannot prove that reality is non-illusory by appeal to language and perception because nobody can establish that their perceptions are totally separate from their minds (thus, they cannot prove that what they perceive is truly and perfectly "external" or separate from them). Given that, there is no way for anyone to establish -- scientifically at least -- that there is really an external objective reality.
At the same time, because it is possible for people have similar experiences and to communicate about a seemingly common shared reality, there is also no way to establish that everything is just "in one mind" or "in my mind" etc. In other words, nobody can prove that what they experience is all only within their mind -- that there is nothing "external" or "separate." So neither extreme is provable: that there are external things, or that there are not any external things.
The problem is that reality in-itself isn't really structured dualistically -- all such divisions into internal and external are merely conceptual reference frames that we project onto it; they are not actually there "in reality itself." So the concept of "internal versus external reality" is a fabrication of our own conceptual minds. Reality itself is neither internal nor external -- things are neither in our minds nor totally separate from our minds. That's how things really are. But it's very hard to conceive of that situation -- in fact, it's impossible to conceive because the human brain thinks in terms of logical divisions, we are simply not wired to think a paradoxical thought or to understand things that defy logical polarities. But that doesn't mean we cannot experience reality just-as-it-is, it only means we cannot think about logically.
This is why traditions such as Zen for example focus on stopping the mind, breaking logical thought and creating a "gap" in which one is able to suddenly have a direct experience of "non-duality" or the state of reality just-as-it-is. That experience is impossible to describe in logical terms, it can only be experienced directly. But the key point here is that in that experience it is perfectly clear that reality is not divided into "self" and "other," "inside" and "outside," "one" and "many," "this" or "that" -- instead it's really just one undifferentiated whole -- a vast multifaceted fractal that is completely beyond imagination and of which each of us, and in fact everything, is both part and whole at the same time.
That basic core experience is non-conceptual, non-perceptual, and non-linguistic, yet we all have that experience all the time even if we are not usually aware of that fact: it is simply raw awareness. Awareness -- if we don't impose our thoughts and beliefs onto it -- is naked and entirely impossible to describe, and is in fact totally undifferentiated and unlimited. It's just like space or time -- it's empty of all characteristics -- but it's also awake rather than just a mere emptiness. This is the true underlying fundamental "reality" -- everything and anything that is ever experienced by any sentient being requires this basic awareness first. If there is no awareness there can be no experience.
So awareness is the key to it all. Donald Davidson, like most western philosophers, appears to be quite clueless about this point. Like others, he attempts to establish some sort of objective reality based on an appeal to language and dualistic subject-object perception. But this is really just another attempt to use concepts to justify concepts -- in the end it's really a circular argument based on circular assumptions. A much better approach is the one I take -- which says that actually everything we experience is a "real illusion" -- whatever is experienced is an illusion that appears and functions in a way that is equivalent to what we call "real."
So on our conventional level -- that is, within the reference frame we commonly maintain -- everything functions as if it were real, and as if it were dualistically divided. But on a deeper "ultimate" level, the actual state of affairs is quite different. In fact, the basic underlying reality is totally beyond conceptual categories and is not dualistic at all.
One way to establish this is to simply point out that if we assume that the world is divided dualistically into inside and outside, self and other, etc. then it actually leads to the conclusion that there must be a deeper level of reality that is non-dualistic -- After all, what is the underlying reality that connects the so-called inside and outside, self and other? There has to be something deeper than those divisions in which they occur together -- there has to be a deeper level of reality that connects these different partitions of reality together into one "whole" reality. Clearly, since that deeper level isn't one of those divisions, it cannot be called the "inside" or "outside" or the "self" or "other" -- it is not subject those divisions (if it were subject to such division it wouldn't qualify as the underlying reality we are looking for; it wouldn't be able to unify the various polarities of the conventional level or reality into a single system).
So in other words, as soon as one posits that duality exists they are in fact positing that a deeper level non-duality exists as well -- because the poles of every duality require a deeper non-duality to hold them together. You can't have a "self" and an "other" unless there is some deeper level reality in which they both exist and are able to be separated and compared.
The point is here that Davidson and pretty much all western thinkers always seem to make the same mistake -- they are so attached to trying to prove that reality is the way they think or perceive it to be that they don't actually notice how it really IS. Their theories are always flawed in that they attempt to prove something which in fact isn't the ultimate meta-level truth but is only a conditional truth that emerges as a result of a much deeper layer.
Rather than swimming out into the deep water, they are content to flop around in the shallows. I guess that's because they want to be seen and understood by others who are on the beach or swimming in the shallows with them, or perhaps they're just afraid. If they really were interested in finding the actual ultimate truth, they would have no concern for whether or not others thought their ideas were crazy, and they would not be afraid to plunge all the way into the deep waters. But who is really interested in Truth these days anyway? Philosophy died several thousand years ago. Since then almost all of it has been useless hot air. If you really want to get somewhere, read Nagarjuna, a great Indian philosopher and logician. He's the only philosopher who ever really got it right in my opinion.