How good are you at lying?
Some people are naturally very good at lying, while others are not. Some people can create entire alternate lives for themselves, and maintain these illusions by remembering who they have told what to whom and when, to keep the lie going.
Other people cannot lie to save their own lives, as they lack the will, concentration, or moral flexibility to do so.
In your world, spells are "physical lies", where people who witness them believe they are real as they do not know they are lies. If you have no reason to doubt the "truth" of what you are seeing, then you'll believe everything it does to you as well and probably die of a heart attack out of the fear of being eaten by the imaginary creature, or disemboweled by the imaginary sword etc.
And herein lies the method to control characters being too powerful. Someone who is highly imaginative, and capable of imagining more creative lies, may find themselves more susceptible to suggestion as well, so they are actually weaker to the magic of others. If you already live in a demented world of monsters and magic, one more monster chasing you is believable.
If you are the kind of person who will struggle to imagine a blue jar as you have never seen a blue jar before, then a flying shark with frikin' lasers on it's head is literally unbelievable to you and will have no effect on you at all. An angry house cat is maybe more believable, as you've seen one before, but is less likely to do serious damage to you before you shoo it outside.
This also demonstrates how lying too much will make your creations unbelievable to even the most creative minds, and therefore they are a waste of energy. In the time you have wasted, you've probably been eaten by the more believable war-bear your enemy chose to imagine.
Using your example
Nero, from your example, could be having an epic battle with his arch-rival Oren, and they are sending all sort of creatures and spells back and forth between them.
Monkeys Apes with spears on the back of horses, men in robes with swords made of light, and the odd giant whale-gorilla with radiation breath.
Blue-jar-man (lets call him Dave) looks out his window to see what all the fuss is about, but all he sees is two guys shouting at each other. Eventually Dave shuts the curtains and goes back to trying to imagine blue glass.
Eventually Oren can't think of something strong enough, but still believable, to fight the whale-gorilla and in his desperation just blurts out "Um.. well...your mother!". Unfortunately for Oren, Nero's mother is not 100ft tall or very scary, and as Nero has the knowledge that his mother is safe at home, he does not believe the lie and the whale-gorilla crushes Oren flat.
Dave (struggling to believe that blue glass is real anywhere or ever has been real) is disturbed by Oren screaming and looks out the window again. Oren is lying on the floor, apparently having a heart attack of some kind. Nero is just stood there, almost in a trance. Nero can still see and hear real things around him if he wants to believe them, but for now he has to lie to himself (or at least convince himself of the actual truth) to get all of the monsters he has summoned to disappear. Nero believes them all to be true and real (or he couldn't have summoned them) so he has to imagine reasonable ways for them to disappear too. While Oren believed these lies, anyone new Nero meets or fights, will not believe the old lies as they weren't there when they were told, but they will still clog Nero's brain until he can get rid of them. If he can't get rid of them, they will overwhelm him and he might imagine the whale-gorilla flattens him too.
Making it real
Magic could exist in this way in our world already, but as we are more cynical than previous generations, we don't believe that any of these physical lies (dragons, mermaids, flying laser sharks) are truly real, so they have no effect on us. It would just take a few people to believe the lies of others and the power would spread again, as stories of dragon attacks etc. go viral, then more people will be susceptible to the lies and believe that it could happen to them.