One thing from the article that isn't clear. Do people who see little people actually believe they are real, even when they know about the potential effect of these mushrooms?

This is a fundamental difference between psychedelics such as psilocybin and deliriants like datura. Usually, with psychedelics, you know that what you are seeing is not real, or at least, that it is not normal. With deliriants, even if you know exactly what you took and the effect it has, the crazy things you are seeing feel real and perfectly normal until the effect wears off.

What make me feel goes to the psychedelic side is that description talk about something wonderful, or at least worthy of attention. If it was a hallucination in its purest sense, the presence of little people would be no weirder than that of a cat or a dog.

But the fact that it is generally considered unpleasant and not used for recreational or spiritual purposes is more of a deliriant thing.

There are plenty of things that are less strong effects that can still trick your mind to believe something that you know is not really true. Such as when you do the fake arm test. https://pmc.ncbi.nlm.nih.gov/articles/PMC1395356/ It feels real for the brain, even if you know that it's not your arm. I did a test and my brain believed that it's my arm, even if I of course, logically know my arm is not a rubber arm.

There is a similar effect related to Delirium Tremens, caused by extreme alcohol withdrawal. Apparently people across cultures report seeing the same "Hat Man" in their peripheral vision, who disappears when looked at directly, but everyone seems to report the same ominous feeling about him. Also there are reports of people seeing a bunch of spiders everywhere, when going through alcohol withdrawal.