You got it. His reality is as real to him as your reality is to you. If he perceives these people and things in his mind then they are there for him. I have used that same trick many times to alleviate fear and anxiety. When you acknowledge their fear and anxiety and give them a resolutions (real of not) it does make them feel better.
I had to laugh yesterday. One of the residents in Mom's unit was anxious concerning the bus that she couldn't find. So one of the caregivers validated her anxiety, that the bus was not there, and then told her the buses were cancelled because of the hurricane and would start again tomorrow. She went on to say she was safe with us for we were a hurricane shelter. Thinking it was ok (the resident did calm down) she started to walk off when the resident said...."But the sun is shining!" DARN...
lol But it did distract her when the caregiver took her for a ride in the courtyard! You have to laugh! Don't forget the laughter and the smiles... they are what will get you through.