Hacker News Reader

The re-use of the "c" as a soft c in "hallucinate" and then a hard c in confabulate is confusing, and probably affecting the uptake of your neologism.

Yes, it would probably have to be halucinfabulation for purely phonetic reasons.

Maybe if I added a hyphen? "halluco-fabulation"?

would lead to hafabulation. Still not acceptable in my view - confabulation is clearly the correct term

but confabulation sufficiently describes the phenomenon without the need for ugly neologisms.

It would probably help if you didn't drop the "n" from the confabulation part.