"Do fundamentalists/literalists really believe that?"

Well, yes....many of them.
The thing is, as humans who can 'decide', it is quite possible to subjectively 'accept' almost any statement or concept as literal truth without bothering to analyze its factual basis. Holding 2-3 or more fundamentally incompatible ideas simultaneously is one of our most 'interesting' tricks.
If you look at beliefs not directly religious, it may be that all of us manage to do that trick without realizing it. Religion is just instilled at such an early age and reinforced so often....