Are you honest with your kid about their talents (or lack thereof)?
Which do you think is better, and why?
I have to admit, I would much rather have my kid be realistic about his capabilities, than him believe what a special snowflake he is. I always make it a point to be gentle when giving him critiques though...I think that's important. We say a lot of "maybe this isn't your thing, but you're really good at so and so, let's keep working on that" or something along those lines.
It amazes me how many kids (and adults) today have an overinflated sense of self-worth. The audition rounds on American Idol is proof of that! Too many overconfident wannabes, not enough honesty from friends and family. =/