Adjudicating illusions is one of the more challenging aspects of being a DM. The standard TSR sources, like PHB, DMG and CWHB, are somewhat sketchy on details, mostly because any complete system for dealing with illusions would end up faltering in messy game mechanics. However, determining what can and cannot be accomplished with illusions is something that every DM with a player with phantasmal force will need to deal with.
I personally enjoy playing illusionist characters, and, as a DM, always have illusionist NPC's wandering around. For these reasons, I have developed my own theory on how illusions work. It is flexible, powerful, and internally consistent. For those DM's who want some suggestions for how to interpret illusions, I provide the following discussion. Of course, you are free to pick and choose those components that you like, and toss out any you don't like. Comments and suggestions for improvement are certainly welcome!
Below is a small list of subdocuments. The TSR document discusses all of the material on illusions described in PHB2, DMB2 and CWHB. I present a paragraph from one of these sources, then annotate it with my own comments. The theory document condenses the TSR discussion into what I hope is a consistent, comprehensive look at illusions and what they can do. Finally, I'll be providing the descriptions for all of the illusion school spells from PHB2 when I get around to it.
Unfortunately, although I have very specific ideas on how powerful illusions are, I have not yet got around to completing the theory document. In particular, the discussion of the use of illusion in combat needs more work.