I think you make some valid points (in the sense that children are inundated with fantasies, myths, half-truths and outright lies) but overstate the harm that's done to them. Same with adults, as most adults live with ideas that are not exactly truths but are no worse for wear.
Raised as a Dub, I wasn't taught to believe in santa but I know a lot of kids who were ? kids who did, in fact, believe in Santa Clause ? and seemed to get beyond the experience relatively unscathed. I remember in the fourth grade when Ms. Donaldson read to us about a talking pig named Wilbur and a spider named Charlotte in E.B. White's classic Charlotte's Web. Now, we weren't the smartest collection of kids, I'll admit, but I doubt any of us gave spiders a second look after the book was finished. We knew what was fantasy and what was reality.
Still, belief in fairy tales has its advantages and *does*, in fact, assist in living. I'll give you an example...
Personally, I don't believe in a bible god. As a result, I seriously doubt that I will live forever ANYWHERE after I die. It's a disheartening prospect after living for 30yrs thinking otherwise, but there it is. As I've written on this forum before, hopefully just before breathing my last I will be surrounded by those that love me and those that I love. I will expire with the knowledge that I am seeing them for the last time. I do not look forward to that eventuality.
My JW mother in the exact same predicament, OTOH, will die with the comfort of "knowing" she will see all of us (or most of us) again when she awakes into a Paradise Earth? from her temporary sleep. She is deluded, I believe, but her delusion aids her to cope with the problems/eventualities of this life. I believe delusion assists children, too. Helps them (us) learn compassion, as Charlotte's Web did; learn the meaning of friendship and belief in oneself, as The Wizard of Oz did; and many other lessons as well.
Instead of poisonous and lethal, I consider fantasy... in measured doses, to be healthy and life-giving.