Bad Night

Last night CJ woke up several times very worried about monsters. I checked under her bed, behind the toy box, and out the window multiple times. We even sprayed the anti-monster spray. She would never tell me what her bad dreams were about. Finally this morning I got it out of her. We were in my bad talking about real monsters and fake monsters. It went like this.

ME: What were your bad dreams about?
CJ: Monster
ME: Can you tell me about it?
CJ: No. (Lots and lots of tears)
ME: Did you know if you tell someone about your bad dream you won't have it again?
CJ: NO!!!! (many many more tears)
ME: Please CJ, I want to help you so you don't have more bad dreams
CJ: In my dream, there was the tickle monster!!! (more tears)
ME: Did it hurt you?
CJ: NO!!! (tears)
ME: Did he stop when you said "Stop please?"
CJ: Yes (more tears)
ME: (perplexed) Did it tickle?
CJ: Yes (more tears)
ME: Lets try to think of monsters that are not scary. Is Elmo scary?
CJ: No (no more tears)
ME: Are the monsters on Monsters Inc scary?
CJ: No
ME: Ok. Now lets try to think of real monsters we've seen before.

long silence

ME: Can you think of any?
CJ: No
ME: Do you know why?
CJ: No
ME: Because they are not real. The monsters on Seasame Street are puppets. The monsters on Monsters Inc are something someone drew on paper and computers. Artists made them up for fun, not to be scary.
CJ: OK.

Now, two questions:

1. Why would the tickle monster be so scary that she would cry that much about it and stay up all night worried and scared?

2. How do I teach her that monsters are only pretend?