Would you agree that the theme of "Araby" relates to boyhood transitioning to adulthood, in which we have this boy character that has these fantastic perception of the world but finds out that it's totally different from what he imagined and is disappointed by the harsh reality of it?
The study of this excellent short story needs to focus on the word "epiphany" which is key to an understanding of the fiction of James Joyce. An epiphany can be defined as a moment of sudden self-knowledge or understanding, which clearly the narrator displays at the end of the tale when he reaches his romantic goal on his romantic mission for his "true love", and yet throughout the tale the description of the destitution and squalour undercut the views of the narrator showing he is deceiving himself. Thus you are right in identifying the growing up of the narrator as a key theme, and perhaps his move from innocence to experience.
The narrator of "Araby," the boy who in his imaginings sees himself on a mission for the "grail" and manuevers through crowds, romanticizing his infatuations with Megan's sister, realizes his folly with the bitter tears of growing maturity. Furthermore, Maegan's sister's connection to "araby" and the bazaar affords her the exotic connotation as well as the romantic. But, when he arrives too late at the bazaar, the narrator realizes with bitter tears that he has not been mature in his relationship with the girl.
I would say that your idea about theme in "Araby" is very close to being accurate, and your thoughts are even related or similar to the theme. The story deals with illusion and reality, certainly. But the boy doesn't really come into contact with anything harsh. It's not about that.
His views of Mangan's sister are illusions, and he discovers that at the bazaar. Araby, representative of the mysterious East, is just a glorified place to sell stuff and make money for the church. The conversation he overhears is gossip and trivia. He comes to realize that his thoughts, as well as his conversation with Mangan's sister, are trivial, too. He had seen the girl as almost a Virgin Mary figure, and he realizes she is just a girl.
So reality does crash in, but it's more specific than the harsh world kind of thing.
"We have these fantastic perceptions of life, but eventually everyone realizes the harsh realities of the world." I got this from one of your passages on this website, dstuva. Do you think that this could be the theme of the story? If not, then what would be?