Does mental illness always blunt one's ability to see external reality as it is?

No. Some mental illnesses alienate people from external reality, while others alienate people from their own values. The latter do not necessarily blunt one’s ability to see reality clearly. Mental illnesses that skew one's grasp of external reality are known as 'psychoses', and those that disrupt one's relationship to one's emotions are known as 'neuroses.' See OCD and Philosophy by J.-M. Kuczynski