Depending on the narcissist, their reality is whatever they decide it’s going to be. Some narcissists have a bizarre idea of what will cause other people to respect them, so that is what creates the bizarre alternate reality they inhabit.
Most narcissists have fairly conventional ideas of what success looks like, so they’ll pretend to be experts in law, politics, business, finance, medicine, sales, or some other field that is universally seen as prestigious. Because they are sociopathic predators, they may actually tend to do very well in these fields and reality will conform itself somewhat to their facade. Or they may start businesses that are adjacent to these prestige positions—selling essential oils and proclaiming themselves to be ‘holistic healers’ or ‘doctors of alternate medicine,’ for example.
Some narcissists get a very skewed idea of what success looks like (or, despite their efforts & predation, cannot obtain conventional markers of success (such as material wealth, physical attractiveness, etc), or what other people will find amazing & interesting, and these are the narcissists that decide to adopt bizarre personas that they think will be appealing or fascinating to others. These may be influenced by fantasy or fiction films or books, so that these aberrant narcissists will present themselves as some sort of super-empath, healer, mystic, guru, shaman, rock star, ‘animal whisperer’, spiritual advisor, avatar of god or goddess, high priest or priestess, prophet, alien abductee, angel-speaker, tarot reader, psychic, ‘indigo child’, or present themselves as being in some way ‘chosen’ by a higher power or extraterrestrial entity. These folks will generally claim to have supernatural powers, ESP, telepathy, mind reading abilities, the ability to curse or hex, etc. They are nuts.
I am not a licensed mental health expert, but I personally believe that the more outlandish-behaving narcissists may have other mental health conditions in addition to the baseline NPD issue— comorbid histrionic, paranoid, borderline, etc.
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