Never mind that the story had turned out to be lies and foolishness—there was always folks stupid enough to say, Where there's smoke there's fire, when the saying should have been, Where there's scandalous lies there's always malicious believers and spreaders-around, regardless of evidence.
When you hear a true story, there is a part of you that responds to it regardless of art, regardless of evidence. Let it be the most obvious fabrication and you will still believe whatever truth is in it, because you can not deny truth no matter how shabbily it is dressed.
I think Santa Claus is, by and large, quite beneficial, for when the child is finally allowed -- or forced -- to recognize the nonexistence of Santa Claus, then the child is able to go through the vital intellectual process of reconstructing reality in light of new evidence, complete with back-forming new stories to account for past events. This prepares the child for many other disillusionments and gives her vital and well-supported experience in maintaining her grip on reality independent of the stories told to her at any given time.
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