Father-Daughter scene. Imagined?

I'd say imagined. You can see his flies are just open in the objective pov shot, but from Alice's pov his penis is out, so it's as if the open flies provoke an image for Alice of him hanging out in his entirety. As it were.

-"There's no such thing as trolls."
-"Then how do you explain all the dead unicorns?"

Yes imagined She just got home from the fair remember the pervert next to her on the ride flashing her? When she got home it was still stuck in her head.

I've got a job, a secretary, a mother, two ex-wives and several bartenders that depend upon me

There's a very good possibility she was just projecting the exposed genitals onto him based on her traumatic experience at the fair, I didn't view it that way but people have made good arguments for it. The change from just an open fly to exposed genitals when going to the PoV shot may have just been intended to increase the shock, or perhaps the actor wasn't comfortable actually exposing himself to the actress. He does expose himself later in front of someone's legs, very possibly the older actress playing the role of the mistress he's just been engaging in coitus with, but even then he has it partially obstructed by the handkerchief and if it is indeed the actress we can't tell that she's looking at it.

I guess it's kind of a far fetched theory though, that he didn't want other professionals observing his genitals but didn't mind having them on film for the world at large to see.

The inappropriate touching seems to have been almost certainly a matter of reality though, as he shows disturbing semi-incestuous tendencies several times over the course of the film.