I hear you, but to me, he sounds imaginative and delightful. It can be frustrating when kids are in lala land and we're trying to hurry them along or asking for concrete responses. When he's older (or now, depending on his skills) encourage him to write these stories down. We started that with my DS6 and asked if he would write his thoughts and maybe a picture to go with it.
By the way, my son can be too "literal" (it goes both ways). One day he asked where "bewilderment" is. I explained that it means confusion and is not a "place." His response-- "no, the book says right here, 'he shook his head in bewilderment.'"
