You must have a calming affect on her, you are the reality check. I am not sure why she makes the stories that involve sex. Maybe she is afraid that something will happen to her or has seen stories on the TV. Early symptoms of Schizophrenia can be different among age groups. With children the early symptoms of schizophrenia include: odd, eccentric behavior, bizarre and random thoughts/ideas, hallucinations (seeing and hearing things that are not possible), confusion between real and fake thoughts, moodiness, state of paranoia, withdrawn and difficulty relating to others, and/or decline in personal hygiene. Psychosis in children can be a very difficult illness to diagnose especially for children under the age of 12. Children have a difficult time expressing their feelings and thoughts without any illnesses, so trying to diagnose a child with a mental disorder is even more difficult. Although it is difficult, it is important and possible with the help of family members and doctors. Once a diagnosis is made, treatments can be talked about and arranged for long term help.
Other symptoms of the disorder include problems paying attention, impaired memory and reasoning, speech impairments, inappropriate or flattened expression of emotion, poor social skills, and depressed mood. Such children may laugh at a sad event, make poor eye contact, and show little body language or facial expression.
Beacause problems with reasoning is one of the symptoms it is hard to reason with a child that has schizophrenia. I believe the school has the ability to test her and help her parents with her behavior by providing mental health services. If she does not act up in front of you, maybe you offer some stability for her so keep doing what you are doing.