My DD4 asked me if Elsa was based on a real historic figure. I told her as far as I know, Elsa was partly inspired by Anderson's Snow Queen and she was purely based on his imagination. She seemed to be okay with that.
She is cut and dry about fantasy. She told her friends who were really into Ariel that "You do realize that's just Disney, right?" Luckily, her friends (4-5 year olds) didn't really seem to care and she's been instructed not to discuss Santa Clause with anyone unless they bring it up.
I tend to answer her questions with questions and it drives her crazy but that might work for your DD.
