There's a line that Tav only says if you explore every island before you go to the skull. It goes something like: "wait, the figures in those images weren't demons at all they were just githyaki warriors"
Didn't come out in the cinematic but from that line and one the emperor gives just before joining the netherbrain it seems that script called for the honor guard to look like demons when the guardian showed them to us.
Yes, that would explain the dialogue when you side with Orpheus. The emperor says something like 'It is true that I withheld reality to make you believe Orpheus is evil'. I wonder just how many leftover lines there are in the game from the old story.
