I think if you look at the bible from the point of view of an atheist the thing that first becomes obvious is that the books are clearly not all related. If you compare Ecclesiastes to the Psalms or to Revelation and if you compare the gospels to Paul's writings you can see that the different books of the bible have some very different messages.
I think your first conclusion is correct for most of the bible, the second conclusion I am not sure about. I think there probably was a figure that the biblical Jesus was based on but I don't think we can assume what that figure claimed for himself since the new testament was written so long after his life. The first mention of the gospels doesn't happen until the second century. But I would agree that he was certainly popular enough to give rise to Christianity even if I don't believe he was the son of god.
You are definitely correct that believing that you are the son of god would count as a mental illness today. We do have a resident poster who does think this but I don't know what username they use now or if he is still a contributor, he has some very strange ideas and regularly gets told to get help with his condition.