In old oaks
The world is a magical and wondrous place, and human society would be a great deal happier if we could all allow each other the freedom to experience that sense of awe in their own way (rather than railing because they too unscientific, or insufficiently Christian, or followers of the wrong brand of Islam etc.)
Aside from his constant beating of the same old drum (and deriding of all other instruments in the orchestra), I think the Professor is largely missing the point of fairy tales. As the reader may have gathered from the quotation at the beginning, young children live in a world of vivid imagination and for them the fantastical and the impossible come naturally. As part of his speech at a recent scientific gathering Dawkins suggested somewhat po-facedly that,"There's a very interesting reason why a prince could not not turn into a frog - it's statistically too improbable". If humans were slow to believe in the improbable, when would we ever have advanced? Scientific theory would have fossilised long since if revolutionary thinkers had confined themselves to only musing about what the orthodoxy of the day deemed probable. It is not only the scientifically-minded who would stultify without a willingness to enter the realm of the outlandish, but pretty much everyone else too.
As Chesterton's quote also suggests, not only do childhood tales encourage imagination, but also frequently convey moral and psychological messages too. Not all of them are necessarily helpful messages of course, as Colette Dowling noted in her influential rejection of the passive acceptance of domestic drudgery for women and reliance on a male rescuer inherent in the Cinderella story. However, many more childhood folk tales contain strong guidance, such as the instruction that monsters can be overcome, that people devalued as foolish or common can become the true stars of the show, that people are frequently not what they appear to be.
Children (actually people of any age) find it much easier to grasp concepts when they are presented in a dream-like, lyrical way rather than blandly stated as dry concepts. Not only accept them, but elaborate from them in a way that seldom if ever happens with the autistically-rigid listing of purported facts.
Unlike the professor, I am not an atheist or a Rationalist. I have no objection to those who are (except when they have missionary zeal), but wonder if the reason why they apparently have difficulty spreading their message... and seemingly they do, if the various books and magazine articles bewailing the popular preference for 'mumbo-jumbo' over hard science are anything to go by... is in part because many, like Dawkins, don't appear to understand the importance of story.
The various religions of the world, for all that they can become loopy and oppressive and downright dangerous, are united by their grasp of storytelling. Whether it's centred around Jesus, Ganesha, Mohammed, Demeter or Tu Er Shen, religions are great at spinning a yarn and making their involving dramas a part of peoples lives. That is a large part of what makes them popular. The magnificent cycles of mythology are a major part of the appeal of paganism to me.
Whilst there are stories within science (which seems to have been abrogated to Rationalism as if it were something exclusive to them), they are not told well or with sufficient panache to engage the public imagination or become a central part of their lives to the extent that mystical and magical tales have.
We are a narrative species, as Walter Fisher and others have observed many times. As the educationalist Kieran Egan points out, we learn best when subjects are translated into narrative form. Give something a recognisable story template, engaging characters, interesting plot etc., and we will follow it to the point of obsession if it is good enough. We may even become so engaged we shed more tears over the death of a character from the imaginations of Arthur Conan Doyle or George R R Martin than that of someone we actually know.
Of course none of this is rational. Which is half the point ~ humans aren't wholly rational (I'd argue not even half rational) and we crave things that resonate with the irrational part of our natures. If Rationalism is to become the force to be reckoned with that so many of its more vocal exponents seem to wish it to be then it may, paradoxically, have to come to embrace this irrational strand through the use of effective and engaging storytelling.
Oh, and if you're wondering about the old oaks, it's where the fairy folks live!