re: "When our children tell us who they are, it's our job as grown-ups to listen and to..

Listen? Yes.
Indulge insanity? No.
As a small child, my son thought he was a Tyrannosaurus Rex before changing to briefly pretending that he was a Triceratops.
Should we have mutilated him to indulge his ridiculous fantasies or should we have worked him past this silliness?
Glad to say that we worked him past these things and he is a highly successful and happily adjusted man.
Indulging delusions never gives a happy result.