Are they real or people in costumes?

I am also in the "tell the truth" camp - because it sounds like you have a young realist on your hands and lying builds a trust wall between you and the child. My answer would be "you know the movies are make believe, right? Well Disneyworld is a place that brings make believe to life just for a while for all of us. I love to meet Mickey, Minnie, and Anna and Elsa this way too!"

That's an answer that makes it clear it's OK to have fun even though you know the "secret" because Mom and Dad are also having the same fun.
 

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