Oh dear. I've only scanned the last few replies. I was going to come on here with a joyous recollection of all the stories my dad used to tell us about bogles, fairies and the little people, but I think he has contributed to my being a bad parent. I shall blame him anyway.
I tell my almost 6 yo about the Green Man for example, and how he protects the countryside (or not!). I also spin great yarns about FC as he always asks how he gets around everyone on Christmas Eve and how he gets down the chimney etc. Whilst he is quite a serious little boy, I don't think it does him harm. In fact it seems to feed his imagination. He loves to hear the tales, though I do say, "well, I don't know for sure, but this is what I thought when I was little..." etc etc
When he comes in time to question it, I suspect I will say to him what I say about God. God to me is an elaborate story, I am an atheist. When he comes home from school saying "God said this, or did that, didn't he Mummy" , I usually remark that some people believe this and some people believe that. I tell him(if he asks me directly) that I don't happen to believe this or that particular story, and that it is fine for him to ask questions. I have no issue with him hearing stories at this age. Or believing them, if they do not scare him silly. We read the Greek myths a few months ago and he informed me that he believed in the Minotaur but not Medusa 
At the moment, his questions about FC are clearly about enjoying the moment, as it were. If I thought he needed to know the absolute truth at any time, I would not hesitate to tell him.
Happy Christmas!!!