In terms of Steve, Dr. Psycho actually turns himself into Steve via ectoplasm (cf. the Captain Wonder / Wonder Etta storyline), so he is literally walking around in a Steve-disguise. Whereas Maxwell just conjures an illusion of Steve in Diana's head (and everyone else's head as well, if need be.) So Dr. Psycho is a wolf in sheep's clothing, whereas Maxwell is mere headgames.
The difference is "dramatically" different. One makes for great drama, and the other is rather boring. To illustrate this, lets play out these two scenarios:
You're in a theater. Diana and Steve are on screen. The pest behind you starts talking, "Steve is actually Dr. Psycho in disguise." Woah - you worry for Diana, she is so vulnerable as she opens up more and more to "Steve." It's like a horror show and she doesn't know the killer is standing right next to her. You're on the edge of your seat and you...can't...stop...watching!
Ok, other scenario: the pest behind you says, "See Steve, he's really just Diana's imagination." Wow. Trippy. And kind of boring. Enough of the head games - can't wait for the next scene with real characters on screen.
Back to scenario #1; it's the love scene. "No Diana! Don't do it! It's Dr. Psycho in disguise! Aack!" And everyone in the theater is screaming at Diana to tell her she is in peril, and everyone is throwing buckets of popcorn at the screen to get her attention, and it's a big riot. That's great drama.
Ok, now scenario #2 with the love scene. "You see Diana rolling in the sheets? She's tangling with her own imagination." Wow. Heady. And rather meaningless. Next scene please.
So the Wolf in Sheep's clothing scenario produces infinitely better drama than the "figment of the imagination" scenario.