Lugia knew this match wasn't going to be easy. Being one of the more intelligent Pokemon, it needed to resort to cunning and psychic powers to take it!
...unfortunately, looking into the mind of Kefka is like opening a canned soda after its been put into a blender and miraculously not opened yet...that has been fused with plutonium.
I'm not sure what the analogy entails, but the point is, its dangerous. So much that Lugia couldn't look into Kefka's mind for more than 2 seconds without the risk of being mentally scarred, and what he DID see...well, lets just say there's a reason he went the route of forfeiting.