What is term for an emotionally void person who cannot be honest with themselves and fakes their own happiness? They obsess about a childhood that was terrible but they make it into a fantasy.
Such persons are said to be "in denial".
You might be looking for expressions like:
1) fantasy world something existing solely in the imagination.
2) fool's paradise a state of being happy for foolish or unfounded reasons.
3) through rose-colored glasses With an unduly cheerful, optimistic, or favorable view of things
So, you can say for example, "xyz person lives in a fantasy world"