Special Challenge 678

Everything Literally

“Readers take everything literally unless they know to do otherwise.”
— a Bewildering Stories motto

In Ada Fetters’ “Different Spaces”:

“Part of the magic of childhood is an acceptance of transformative self-states, though among adults these childhood transformations are often viewed as commonplace, a mere expectation [...]”
On what grounds can one argue that both children’s and adults’ viewpoints are rational? Leading question: At about what age does one normally cease to grow in terms of physical size?
“Children show a willingness to integrate strange experiences into an ever-changing self, even when this means walking lightly through the spaces of cultural madness.”

Adults can normally distinguish between reality and fiction, and adults can knowingly write fantasy. Do children do the same? Do they hear or read fantasy as such? Do children possess a baseline concept of reality sufficient to distinguish between reality and fiction?
All literature is either overtly or implicitly moralistic. What is the function of fantasy — as opposed to realism — in children’s literature? Why write fantasy at all? What can it accomplish that pure realism cannot?