Okay, so now I'm thinking that you should give up on trying to turn his fantasy play into some sort of writing activity. As long as it seems like a healthy diversion for him, let it stay fun for him. He's 7 and there's a lot to be said for having a rich fantasy life.
I don't know anything about the NYC homeschooling requirements, unfortunately. Are there specific documents you need to provide that show his actual work, or are you required to document his time and activities specifically relating to each particular grade-level academic area?