Oh man, I would love to try VR in zero-G. I wonder if the visual ground reference would take over for the lack of vestibular ground reference? ZOMG! There is science to be done!

They create demand, which means people work to purchase them.

That work brings value to society (person x helped build a bridge, y did a dental implant, z built a yacht (horrors, a toy for a rich person, but recursively read this post)).

This is how economics works. You can't artificially split out some random activity, decide it is 'frivolous', and tax it out of existence. We are creating things, not destroying things. Dollars spent do not disappear, they are leveraged and multiplied via the labor of millions as they pass through our hands in an elaborate dance of IOUs. A dollar bill is a chit - a promise of later labor.

For an extreme example, imagine that every day I hire somebody to move my wood pile to the other side of the house. After two days I'm back where I started, but I've wasted a person's labor for two days. The dollars I paid them didn't disappear, but we've lost whatever useful activity they might have done during that time.

Not all work brings value to society. Just because someone is given money to do something doesn't make that something useful. On the other hand, just because something isn't of value to society doesn't mean it should be prohibited or taxed out of existence. And determining whether something is useful to society is really tough, so we shouldn't assume we can figure it out. But saying they "create thousands of jobs" and "dollars spent do not disappear" isn't a good argument for these things.

Ponzi schemes for example are illegal. Gambling creates no net value so it is tightly regulated. Cigarettes are a net drag on society so they are highly taxed.