DD10 has always had a tremendous imagination. She has even had adults fooled several times now into believing she has an older brother. She brought DD8 into the game too and the two of them working together on this farse is totally believable.

Both girls have huge memory capacities so they can keep it going or come back to things much later and pick up right where they left off.

I don't think we have ever been really concerned that either girl can't distinguish between reality and their imagination, but they do take it pretty far sometimes. Lately (even still at 8 and 10 years old) they have been pretending to run a daycare. We have several imaginary toddlers, etc running around our house that I've accidently sat on or bumped into. I apologize, dust whoever it is off, and go on.