False information is definitely more damaging than non-information, because in the best case scenario you ignore the false information. In less-than-best-case scenarios, you fail to ignore the false information and are actively misled.

Suppose there are 10 boxes, one of which contains cash.

If you could open the boxes and see which one had cash, you'd be in great shape. But if you can't, you obviously should prefer leaving all the boxes closed (blindness), rather than somehow seeing cash in box #7 even when it isn't there.

I think the only reason people would be tempted to choose hallucination is that hallucinations in real life are usually relatively mild and often correctible, whereas blindness can be total and intractable with present technology. So given the choice between schizophrenia and blindness, I probably would choose schizophrenia, because schizophrenia is treatable.