It's difficult for me to answer this in a helpful way because my daydreaming was never out of control. But I was very impressed with something J R R Tolkien once said about creating fantasy worlds. He was of course a devout Catholic and he believed that our ability to do this is part of the image of God in us.
But that means that, once we have created a world, we have a moral responsibility to our characters. We can let bad things happen to them but we must give them a fair chance of coping. We must not not manipulate their emotions or treat them with unreasonable cruelty because that is not how God treats us.
Tolkien hated his friend C S Lewis's Narnia stories because they were partly allegorical and that meant that the characters had to do what the shape of the allegory required and not what they perhaps might have wanted to do if they had really had free will.
I have always been greatly impressed with this attitude and have tried to replicate it.