Blanche needs to modify reality in several ways. When she makes her lantern by covering a stark light bulb with coloured paper, it's not only to soften up the light in the room (to make it more homey and romantic-looking) but also to dissimulate her age.
Blanche also needs to revamp her past. As Mitch is showing an interest in her, she is afraid he will find out about that sordid chapter in her life when she worked as a call girl. Stanley finds out about this and threatens to tell. Another incident - when she was much younger, Blanche's husband committed suicide when she found out about his homosexual affair and rejected him, a tragedy for which she felt partially responsible.
Blanche has a hard time accepting these events in her life and tries to substitute truth with illusion. Given these circumstances and her own fragile nature, it is easy to understand why Blanche wants and needs "magic" instead of "realism."