I believe such stories help a child develop a format for dealing with difficult people and adverse circumstances. I meet pigs, bad wolves, bears, greedy giants,packs of theives, and magic bean planters almost every day, and I thank my bubby, my kindergarden teachers and all those that prepared me for this reality.
Tzvi Hersh, there is a collection of Jewish tales from all over our galuyot, fairly benign stories with of course, a mussar embedded. The editor (Dov Noy) makes a strong argument that many of the well known tales are predated by Jewish tales of the same motif.