Considering the implications of the current fulfilment of Owen Barfield's 60 year old prophecy which I posted earlier today, this brings out the vital difference between imagination - on the one hand - and what might be termed intuition.
Imagination is (roughly) the pictures and other representations in the mind; while intuition can be understood as direct knowledge of reality. Imagination refers to reality, inuition is reality (albeit fragmentary).
Direct knowledge of reality is, of course, a divine attribute - and attainable by humans only to a partial and intermittent degree (at most!). Such intution happens during what I have recently termed primary thinking, which I consider to be the same thing as what Owen Barfield terms final participation.
Primary thinking means thinking in the universal realm of reality (not thinking inside our heads, but thinking in a universal realm) - which is necessarily true; while final participation refers to the fact that this is a participation in creation - 'final' because it is to join with God in this ongoing work, and there is no further for participation to go than this.
So - imagination is a higher form of thinking than the literalistic, yet it may be false and distorted - it may be dishonest and ugly. In fact, nowadays in The West, most products of imagination are thus corrupted; and even among the greatest geniuses of imagination (in the arts, for example) there is a great deal of such corruption, especially over the past 200 years and more as we get more recent, until at present most of the best products of Western imagination (novels, poems, movies, TV, music, painting, sculpture etc) is net-evil.
Whereas intuition is always real, true, good and beautiful. And it is intuition for which we must all strive as our very highest priority - for each of us as individuals, and for our society at every level up to the highest.