Of course, somewhere between the Hallucinatory Terrain and Pocket Universe spells should be another spell: Hallucinatory Domain. The area of effect is essentially the same as Hallucinatory Terrain, or perhaps larger (one league?) Multiple people can experience the hallucination, which will seem real in every sense, but the spell is tied to one person and has rules and termination clauses that work the same way they do for the Pocket Universe spell. Thus, a fairy could cast a spell on a princess with the rules "everyone in the kingdom sleeps an unaging, endless sleep" and "a wall of thorns surrounds the palace", plus the termination clause "a prince kisses the princess". Heck, even "the sleep begins when the princess pricks her thumb" could be considered one of the rules; thus, Hallucinatory Domain can include a delay, or have programmed changes.
Edit: Forgot to say that I would make this spell 6th level because of its two improvements: illusions can be interacted with (do not vanish when touched) and scale is much larger.