My buddy does IT work for a school. He told the kids he fixes computers and this one little boy got real serious and asked if that meant he fixed the robots that turn into cars. Had to explain that was a different job, but the kid was kinda disappointed. It's wild what kids put together in their heads when you tell them what you do for work. That dragon castle question is totally in the same vein.
Heard about a neighbor's kid who asked his mom, a teacher, to teach their dog how to read. She made up a whole lesson with alphabet flashcards for the pup. Kid was totally invested in the idea for weeks. Just shows how their minds blend what adults do with everything around them.
Reminds me of a friend whose kid saw him fixing a sink and asked if he could fix the moon because it looked cracked. It's like what @rileyb61 said, kids just smash different ideas together. Their logic makes perfect sense to them even when it's totally wild.