WMG / Costume Quest

The real Aesop of this game is "Homemade costumes are inherently better than store-bought ones"
  • After all, you make every single one of the superpower-granting costumes yourself, and none of the generic NPCs (with presumably store-bought costumes) can do this, even when directly attacked.

Dorian's magic is the reason the costumes allow the kids to fight back against monsters.
He's incredibly powerful, much like his sister, but since he's too afraid to face her, he invests his power in the three heroes instead, trusting their imagination and pluckiness will pull them through. Which it does.

Wren and Reynold are from a family of wizards.
They're the ones who are empowering their costumes. Their family recently moved away from a place where magic is expected.
  • Alternately, Wren and Reynold are descendants of the Galochio family, powerful psychics (and magic users?) who moved away when they discovered that the rival Aquatos, who they had cursed to die in water, were out for revenge.

Everything that seems to have happened did
Goblins? Yep. Actually Three Mooks ? Yr 3 GF s

Every kid is capable of empowering their costumes, though they only work when fighting Repugians.
Some of the kids you meet talk about how they have fought monsters. Plus, one of the kids in hide 'n seek tries to use Fire Breath. This could have been an attack, but given that children were the target, nothing happened.