Return to Oz did the same thing, so at least Disney is consistent. Everything in Dorothy's life was paralleled in Oz. It's true that Aunt Em thought Dorothy was mentally ill, but the movie made it plain that both Kansas and Oz were real.
Unless someon thinks that the feelgood ending was just a deception and Dorothy seeing Ozma in the mirror was really horror movie ending?
Again, the idea that you can do anything if you believe, a prominent part of Oz the Great and Powerful, makes the reality of Oz simultaneous with the reality of Kansas. Would it make people feel better to mumble "parallel realities," or would that feel too science fictiony, not fantasyish enough?
The movie really does contradict one aspect of the musical, which is, James Franco is something of a bad man, but a good wizard (i.e., kicks ass.)