I'm working on a short story right now in which the protagonist's self delusion is an important part of the story's irony and resolution. She thinks she impresses people in a certain way and can't understand why her own husband doesn't acknowledge this, but is instead, verbally abusive and demeaning to her. It's not so much that she sees the world through the proverbial rose-colored glasses as that she doesn't see the world, not as it is anyway.
So, to start the discussion, does a character's delusion ever prove a useful tool in your own writing?