Adam...I would agree with your line of reasonng, except very few adults that I am aware of still believe in Santa or the the Tooth Fairy! The same can't be said of ghosts, spirits, etc...
I do agree, that at some point, reality has to be seperated from fantasy...the timing is the issue. I personally, don't see harm in a little fantasy when the kids are young...as I mentioned before, reality will come crashing in on them soon enough!