I, personally, like the idea that their child's Imagination empowers them, and the less and less they act like their child imagines them to be, the more and more they move toward Nightmares. Essentially, Imagination replaces the standard Humanity track. At high Imagination, they act extremely close to how their child envisions them acting: Defending the weak, defeating nightmares, being extremely Lawful Good(potentially to the point of Stupid Good?). But that's an untenable position because Nightmares can trick and confuse bears who have such a rigid way of dealing with things.
On the flip side, the lower their connection to their child's Imagination the more and more they act like Nightmares: Lying, stealing, cheating, oppressing the weak, outright murder of Dreams, etc. Ultimately a bear that completely loses its connection with its child's Imagination becomes a Nightmare in its own right.
How would this work for a teddy bear that the child imagines to be evil?