Well, we do Santa at my house. And the tooth fairy. And, I didn’t want to do this, but my daughters teacher does it at school so we have to do it this year - but that dang Elf on the Shelf. And yes, they think it’s real. At least to my face, they tell me it’s real.
When we went to Disney World, they were 6. We had told them that Cinderella lives at Disney World. Rapunzel, Ariel, etc. all live at Disney World. So when we went, they were the real thing. The first time a kid sees a face character, all they have seen prior is a cartoon, so it’s real to them. They have no basis for comparison. My wife and I noticed that there were different people playing the characters and the faces are much different, so how can kids not realize this? We figured that kids must look at the dress and not the actual person. Or maybe they just forget. We figured Disney would try to get people with at least somewhat similar facial features, but apparently not.
The furry characters - I think they caught on to that pretty quick. They asked why they can’t talk. Pretty soon they asked if it was just somebody dressed up. We played along and said no it was the real deal, but they got it. They started to play along too though. They were 6 at the time.
Now they know the face characters are just people dressed up as the characters they are playing.