In Yogacara Buddhism, is discontinuity an illusion, and does change arise? Buddhists talk about discontinuity 


  ordinary consciousness consists of the discrete cetas


and illusion


  all is illusion and the external objects are nothing but the creations
  of our mind



In Yogacara, are all moments discontinuous -- the idea that nothing is ever the same thing twice and no two times meet -- and an illusion?
Does that mean that durations -- even-though consisting of impermanent events -- only seem to arise persist decay or cease? Why?


I can intuitively see a link between 1 and 2, and I am in effect asking about that. Put another way: is the flow of time we psychologically experience itself permanent?
Like Andrei says, this isn't something normally taken up by yogacara.  Nevertheless, if you wanted to pull this system into the discussion, it would seem that yogacara argues in favor of continuity at least in respect to the unenlightened mind.  One of the characteristics of the alaya vijnana is that it gives a false notion of consistency to the self and the thrice transformed objects of consciousness.  Specifically in regards to mind consciousness, the cetas are superimposed by the alaya in a consistent way.   I don't know of any instance where yogacara makes the argument that all consistency is vacated upon enlightenment, but it stands to reason that once the transformations are abandoned, each sense object and mental construct becomes fully discrete and not warped by residual mental seeds in the alaya.