Molly's crystal palace is derived from crystals her father gave her.
Molly's illusions are shown to come from what she imagines in her fantasies. Her new father is an Entei because she imagined her dad to be like one. Her new mom is Delia because she was watching her when she asked for a new mom. The crystal palace may also come from memories.
Her father is an archaeologist, so he might have given her crystals as a gift from his work. Molly would have played with them, and perhaps one day arranged like a toy castle, which the Unown then brought to life.
Entei is actually Molly's father turned into a Legendary Pokemon
We never see them both on screen together, her father is sucked into the Unknowns world, then later Entei appears at the mansion because of Molly's wish. Entei sacrifices himself at the end and vanishes from existence, then Molly's father reappears in the temple. Entei was created to be a perfect father, or at least what a five year old thinks is perfect. Entei is strong, powerful, caters to Molly's every need and treats her like a princess while obeying her every command; leaving very little left of her real father save for protective instincts. We don't see much of her dad after he returns, but we can assume he bettered himself after the events of the movie. (we see Molly's mother come back during the credits who had disappeared prior to the film, possibly having something to do with the Unknown just similarly to Molly's father)
In the movie, the report was written with grammatical mistakes(applies to both English dub and original Japanese), but when they found out Spencer Hale has been spelling unown as "Unknown", that was the final straw.