I suspect there are phases and cycles, Carol. Our 7-year-old grandniece does play and imagination (and drags along a deteriorating stuffed bunny everywhere — different topic) but still delights in showing off knowledge about how things "really" work.
I was as bad at her age. (Okay, maybe worse. Probably worse.) I dreamed and imagined, but my universe became more and more concrete. Deterministic. Logical. Straightforward. Religion turned into atheism. Romance turned into cynicism (well, in between crushes, anyway).
And then I got into chaos and complexity theory. Added to my background in quantum mechanics from college, it showed the world is a very, very, VERY frakin' weird place. Magical? Um... okay, I can go with that.
The kids are alright. They'll come around.