You can refuse to buy into the conspiracy theory drivel that is so commonplace on the web these days. That does not make this sociopsychological phenomenon go away. In that sense, and by your definition, this phenomenon is now part of "reality."
Yep. The reference is not the referent, the map is not the territory, etc, etc. A hallucination of a witch can't hurt you; a mob of hallucinating witch hunters very much can.