We had a similar issue with ghosts and DS3. We kept explaining they don't exist but I don't think he got it. We explained it using fiction and non-fiction books - he understood that non-fiction books were real things and fiction books were made up stories. We explained that ghosts are fiction, ie stories made up to scare people and he grasped that concept much better. When he has a wobble we remind him ghosts are fiction and it seems to help.
Could you sidetrack her onto good werewolves? There's a series of books called Alfie The Werewolf, about a 7-year-old werewolf, that might be a bit advanced for her to read herself (although DS read them at 6) but you could read to her. The first one is called Birthday Surprise.
How can i convince my 5 yr old DD that werewolves do not exist. Since halloween, when she has heard some references to werewolves, the first thing she talks about in the morning is werewolves, and feeling frightened, she dreams about them, and talks about them several times in the evening, and i have tried to phrase it every which way i can possibly think of, that they are not real. Any tips ???