According the Merriam-Webster Dictionary, an epic is "a story about a hero or about exciting events or adventures." The dictionary also states that an epic often extends beyond the usual or ordinary. Some other words the dictionary notes about the word are: great, large, impressive, and legendary.
Beowulf is fiction, and should be read in such a way. Therefore, its unrealistic elements played throughout the characters, settings, and events don't compromise its value as an excellent piece of literature. The epic's survival speaks for itself. Even without an author, the classic poem has survived since the years 500-1100. It is still read today in many classrooms around the world.
The fact that the characters in Beowulf were formed around characteristics of Scandinavian and Celtic people also furthers the point that this type of story was one that would likely entertain readers with its larger-than-life characters, unfeasible battle halls, and enchanted weapons. The story has been passed down for many years, was eventually written, and was adapted into many film versions. The exaggerated tale expressed in the long epic is probably as popular as it is today because of its unrealistic elements.