It's been my experience, and is my opinion, that honesty always works best. There's nothing you can do to change the circumstances of the situation you're dealing with. You are who you are, and part of that is having Lyme disease and dealing with illness.
The first thing I would do is have a talk with your doctor, and possibly find out what your legal rights are as far as having an illness and/or disability that effects your work.
Talk to Human Resources at your job and find out what kind of benefits might be available to you if it should (or already is) get to the point where you can no longer continue working.
Finally, I'd have a straight-up and honest discussion with your boss and let him/her know the concerns you have. The facts are the facts - if you're making mistakes and not keeping up with work the way you used to, you're not going to be able to hide it forever...and it's only going to cause you stress the more you try to cover it up... Tell your boss how worried you are that your health issues are beginning to effect your work. See what s/he says... You may find that what you're so worried about disclosing or exposing, isn't really a secret. Let them know you are getting treatment, that you don't want to lose your job, that you're doing your absolute best, but you're very worried that you've been making mistakes and might not be up to par as you were before...
Do you have the option to sign up for long-term disability? If so, this may be something you might consider doing, since oftentimes it won't kick in for six months (more or less) after you apply. See if there is any kind of retirement disability available, too.
You're not "stupid" and for someone who hired you to make such a suggestion would be an embarrassment to themselves. You're dealing with an illness that can and does have an effect on the brain, on memory, on concentration, etc. It has nothing to do with stupidity. Ask for help, and just be honest with what you're going through. Any good, compassionate person will want to do what they can to help and accommodate you (and there are laws that support people with disabilities, although if it comes to needing them, you will likely need a lot of support from your doctor).
Good luck - hang in there! We ALL have "off" days.