Regarding your post:
We know what the theme of the season is, Bunk told us back in episode 1: the bigger the lie, the more they believe. This is, obviously, where Simon and co. are going with this, and I think it's an important point. As far as the investigation has gone at this point, with all the evidence, who would even THINK to question if this killer is in fact real or not? We have several bodies, all linked through the various ways Freamon and McNulty linked them, and we have the "killer" calling both members of the Baltimore Sun and the police department. We know it's fictitious, but no one else does. Keep in mind, too, that people want to believe it. In the "CSI", "Law and Order" "Dexter" America, we love our serial killers and find the whole sick, macabre thing thrilling. Now Baltimore has one, and I imagine its citizens feel more than a little excited. Why, at least at this point, question it?
Which brings me to my next point. In the time span of the show, the killer thing has only been happening for a few weeks, a month and a half at most. The evidence keeps piling up and Freamon (if not McNulty) is smart enough to make it all look convincing. The con would not hold up under long, protracted scrutiny, of course not. They don't want it to. However, as we are seeing, it is rapidly escalating and getting out of control. In these last few episodes, Katie, we may very well find out you are correct: we see that it's not realistic and wouldn't work when it doesn't, when McNulty and/or Freamon are caught, to one degree or another. I hope they pull it off, but the odds are against them.
The one thing I'm wondering is if they plan to pin all these "murders" on someone...and who that will be. It's going to be an exciting three weeks.