Good post, Richard - it is quite OK (in my opinion) to tell fantasy and fairy stories to children as long as they are grounded in reality in the rest of their lives. Gradually, they begin to discriminate between fact and fantasy, and work out for themselves where the line is drawn. When my son was three, he said to me "Dad, is Santa real or not?" I had to answer truthfully. He said "Good. I thought so." The point is, he was ready for the truth. Just about every child can handle the truth, as long as they are secure in all of the other important areas in life. Why we would foist some evil religious idiocy upon them, to boot, is beyond my ken.

All of that is anecdotal, of course; you are right to suggest that research is needed to ascertain what the reality is.