The entire universe exists within confusion, not outside

Confusion is not a misinterpretation of the world; it is the world itself as we experience it. The universe is not “out there” being misinterpreted by a confused mind. Confusion is the very structure of ordinary experience, and the universe we see is its content. Vasiṣṭha is saying something that quantum physics would reformulate twenty-five centuries later: there is no observer separate from the observed. The appearance of an independent external world is part of the confusion, not its object.