Withers states
Illithids have no souls
but I don't understand the significance of this with regards to.
What does he mean by not having a soul? No afterlife? No sentient autonomous existence? Illithids such as the player character if they go full squid in the endgame, or the emperor, seem to retain "personality/autonomy" while under Orpheus' protection. Does Withers mean illithids without Orpheus' protection are just puppets piloted by an elder brain, even if they don't seem so?
Best Answer
In Faérun, remember that souls are "real" in the sense that they are an intangible quality that exists separate from the body. The soul goes to the Fugue plane and becomes tangible when it dies (usually), and directly powers divine entities via belief.
In that sense, the "person-ness" of a being is tied to the soul itself rather than the body, or even the brain. But that should not be taken to mean that a soul is required for autonomy. Most undead, for example, are just fine with a soulless existence¹. Benji the ghoul even keeps a steady job at the circus!
The opposite is true for outsiders like devils, beings made entirely of soulstuff. Remember: every² devil was promoted from a lemure, and lemures are created by torturing mortal souls until they morph into a devil.
In D&D, traditional resurrection spells work differently on both of these classes of creature. In many ways, the return to life involves entreating the soul back into the body -- so creatures who are just souls or just bodies aren't helped by a spell that has nothing to stuff (or stuff into).
Which brings us to Withers.
This implies that the mindflayer who arises from ceremorphosis is not the same being from before the process started. It might have copies of your memories, and it might float about in something that was once your body, but if the soul is gone, it's no longer "you". (This is heavily implied by the Act 3 Dragon Boss vis-à-vis The Emperor)
You are correct that this would also mean no afterlife (at least for the illithid itself) and there's an implication that The Dead Three's plan to control the world is flawed because it would reduce the number of souls entering the afterlife (and no souls means no divine power).
As to the rest of your questions, they relate more to the nature of illithid life than the ramifications of being "soulless". Illithids are eusocial creatures who are entirely subservient to their respective Elder Brain (The Emperor and Omeleum are very much the exception). While individual mindflayers might occasionally be dominated by their elder brain, their ability to work independently for the good of the colony is the primary benefit they provide. None of this requires a soul.
Orpheus' protection seems twofold -- it prevents being psionically dominated by an elder brain, and it sort of "pins" the memories of newly ceromorphed illithids in place; as soon as Orpheus leaves, a Tav mindflayer begins thinking unsavory thoughts, and the game gives you a choice to either commit suicide³ (before you become unrecognizable to yourself) or resolve to hold fast to your personality (following in The Emperor's example) despite the risk.
1 - Vampires are weird. Like most things in D&D, exceptions to these general rules exist.
2 - Again, exceptions exist.
3 - Though, since you're a mindflayer, you kinda already did.