... and is probably my favorite statement on the subject you have raised.
The anthropomorphic personage Death has taken on the job of delivering presents on Hogswatchnight when the Hogfather inexplicably disappears, and has a job of it figuring out human motivations but does pretty well. Among other things, he says that in his usual line of work he is not called upon to ask if people have been naughty or nice, but he'll do his best.
In the course of the book it turns out that the Hogfather has been targeted for assassination by a group of creatures who believe the Universe will run a whole lot more smoothly without imaginary nonsense like the Tooth Fairy. Death sends his granddaughter Susan to sort this out, which ultimately she does.
In the final part of the book he talks it over with the ever-skeptical Susan:
"Death: Humans need fantasy to *be* human. To be the place where the falling angel meets the rising ape.
Susan: With tooth fairies? Hogfathers?
Death: Yes. As practice, you have to start out learning to believe the little lies.
Susan: So we can believe the big ones?
Death: Yes. Justice, mercy, duty. That sort of thing.
Susan: They're not the same at all.
Death: You think so? Then take the universe and grind it down to the finest powder, and sieve it through the finest sieve, and then show me one atom of justice, one molecule of mercy. And yet, you try to act as if there is some ideal order in the world. As if there is some, some rightness in the universe, by which it may be judged.
Susan: But people have got to believe that, or what's the point?
Death: You need to believe in things that aren't true. How else can they become?"
It's not about the presumed innocence of children, though I do believe in letting them approach knowledge of all things adult at a slower pace than we currently do. (Violence in tv and movies, and the sexualization of pre-teen girls comes to mind, but there are other examples.)
No, kids long ago were brought up on stories such as those collected by the Brothers Grimm, and those contain some pretty rough stuff about the world. Hansel and Gretel are left to starve to death in the woods by their father when he and his new wife fall on hard times and run out of food. There they find an edible house inhabited by a wicked old woman who uses it as a trap to catch children which she then fattens up to eat. It is only by the cleverness of Gretel that the children escape, and they shove the old woman into her hot oven and let her burn to death.
The stories we tell them today are pretty benign by comparison, but they have lessons if we choose to teach them....
There's more to be said from a psychological/mythological perspective, but that's all for now.
The Pratchett quote may be found here:
http://sharetv.org/shows/terry_pratchetts_hogfather_uk/quotes Hekate