My 8 and 12 year old can't because I am a parent that actually cares, I won't even play a violent game when they are up because I care.
Yes, they can tell the difference between reality and fiction. But there are two things here:
1 - Video games are different then watching games. Studies have been done, and duplicated to show that young males who play violent video games cause damage to parts of their brains that help them control their emotions, learn and problem-solve. If I find the study I will send edit and attach. But the important part of the study is it is verifiable with young males. The interesting thing is that non-realistic violent games don't cause the same issue and that young males who just watch and don't play do not have the same results.
2 - Saying " Did you raise mouthbreathers that cannot distinguish between reality and fiction?" is like saying "Yah my 6,7 or 8 year old can watch hardcore porn because they can distinguish between reality and fiction because they know that this is just actors acting out fantasies and not reality.
Alcohol, tobacco, driving, certain movies and games all have age limits and ratings for reasons. If you have ever seen kids in elementary school not only bullying other kids but acting out "call of duty" and calling to kill their victim then you will realize that these games are not for young kids. You will realize this if it was your own 9 year old son being bullied.
You would not make comments about this when the two bullies admit during a meeting with the principal and councilors that they would regularly play both Call of Duty and Halo and pretending that all the "baddies" were the kids they were picking on and they would see how many kills on their class mates they could get. It would really hit you especially if you knew them right from 5 years old and knew that they used to be good caring kids.