Jenna,
She really does have a wild imagination! And that can be a good thing!
But she REALLY needs to learn its not acceptable to make up stories and pass them along as truth... Making up stories is one thing(thats a sign of a healthy imagination...)..telling people that they are the truth is another thing...
also...the story she told to get you upset and get you in a panic attack...sounds like something serious to me..thats not a normal thing for a child to do..so you are right to have some concerns at this point.
I might try to..sit her down and explain to her that you know shes been telling fibs and making up stories...but that it isnt acceptable to do that and try to pass it off as the truth... tell her that she is so smart and has a great imigination and that you proud of her for that...BUT lying is NOT good and it is NOT allowed in your house....and she will be punished every time you catch her at it..(and you HAVE to follow through with punishment EVERY time so she really understands that you are VERY serious about this..)
Tell her that you will make a deal with her...when she gets the urge to tell her grand stories that ,
1: you will sit down right away with her and listen to her great story..(then you can tell her what a great imgination she has..and praise her for not turning it into a lie)
2: Get her a pretty girly (or whatever shes interested in) journal and tell her this is HER special place to write down her stories.. But that if she gets caught lying and making up stories as truth that she will get punished very severly for it...(i.e. take away what she loves the most...etc...)
3: since it seems she likes to tell her stories out-loud by talking... could you get her a cheap little voice recorder thing.. ..and again..tell her that this is HER special place/thing to record her great stories... but again..if she gets caught lying...she gets punished.
Good luck sweetie!