Michael eating maggots

Many legends and stories have vampires using hypnotic powers. That's what I figured was happening.

Many legends and myths of vampires have some form of hypnotism at least implied. In Dracula, for instance, the Count definitely has sway over people and can exert his will over them. I'm not sure if it's true mind control or if Dracula could have made somebody think they were eating maggots, but he does invade the thoughts of Mina, hold gypsies in his thrall, and possesses a link or control over Lucy as she degenerates.

As to The Lost Boys specifically, it could have a supernatural or logical explanation, or perhaps a mixture of both. Michael's had a crazy night. He's up late, he's probably still shaky with adrenaline, he's in dark, strange circumstances...he's probably open to suggestion. I think a slick trickster could probably suggest, "You think that's rice? It's really maggots!" and have somebody in a dark place look down and think they saw maggots. Maybe it's a vampire power, maybe it's just suggestibility and hypnotism like a magician's act.

It's probably meant to be a power David has, but I'd guess it requires the verbal component and perhaps the proper mental state of the victim, too. If the victim needs to be unsuspecting, for instance, that would explain why David couldn't just manipulate the Frog brothers into attacking each other.

Also: just because folklore doesn't back it up doesn't mean that it couldn't be part of the movie. Silver wasn't a weakness of vampires in the original folk tales (to my knowledge), but Blade and D&D has silver as effective.

My favorite part of that scene is when, after Michael has been told he's eating maggots, one of the other Lost Boys mutters: "That's sad, man."