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The condition my husband has, Lewy Body Dementia, commonly includes hallucinations and delusions. They are frequently beneign. Often the person enjoys them. The conventional wisdom in treating this in LBD is to leave it alone unless it is distressing to the person or is causing harm in some way. Generally there are enough distressing symptoms that really do need treatment that not treating things that can safely be ignored is a relief.
My husband once reported a dead body in our bed, in the daytime. Now that would freak me out -- I'd need treatment if I saw that. But he was not bothered at all. He just wanted to keep everyone out until the police arrived.
If my husband heard a choir, I'd ask if he could request Amazing Grace. But if it were keeping him from sleeping and distressing him, then I'd bring it up with his doctor.
You may be able to go part way on this one, though. People are coming into the house at night. That is his reality. I doubt that he can be talked out of it. So how can you comfort him and calm him and help him feel safer? Ask him how they are getting in. Then, it just so happens that you have a friend who specializes in entry-proofing that area. Maybe he puts in new locks. Maybe he sprays a special repellent along the window sills (that smells suspiciously like Lysol spray mist, but has a convincing computer-generated label). Maybe he walks around the outside of the house, nodding wisely, poking into bush branches, and generally looking busy, and goes back to his car for intruder-be-gone containers to place judiciously around the place. Whatever it takes to convince your father that you take his reality seriously, that you are on his side, and that you have a solution!
Also, he has gone to the police. Can you go to that same station and explain the situation (if they haven't already guessed?) Perhaps as a good-will customer service gesture they would send someone to Dad's house to assure him they are particularly monitoring this street.
Your goal is not the convince your dad of the "truth" -- he already has his own truth, thank you. It is to help him feel more secure, safe, and cared for.
These kinds of behaviors are really heartbreaking, aren't they? Good luck to you as you handle this challenging situation. And come back and let us know what works, it anything.