The problem is in #2. Imaginary cheese is not a kind of cheese.
Edit: I'm not entirely sure this is where I saw it first, but this forum post (ironically, on a Catholic forum of some sort, apparently discussing whether certain games such as Magic are evil...) makes the argument excellently.
Edit2: In fact, I daresay an excerpt from said post is good enough to post as a rationality quote on its own, which I will now do.
Wonder what the author of that post was banned for.
Here's the new thread for posting quotes, with the usual rules: