I don't like it. It's far to disruptive for the game. Even if you could get all the players to agree to not be jerks, nearly anything they create of significance will disrupt the world the DM has made.
It's already bad enough that the players can just, every minute, just randomly "pop' stuff into the game world.
It's already bad enough when the DM makes a small town helpless before a orc horde...and then a player just randomly says "oh, I create the warrior god knights of power in town". So, then, suddenly, the DM must explain why the knights do nothing to protect the town.
Then comes the next big huge problem. Once the player creates the knights of power, the DM then gets control over them. Then the DM, needing to keep them out of the war says "oh, they are all cowards". THEN the player super freaks out as they are all offended their 'special" knights of power have been ruined by the DM.
The worst, off course, is when the players outright cheat. They just make a tavern, a weak foe or just an outright pile of treasure. After all why can't the players just say "ok, right by that tree is a trillion gold coins". Oh sure the DM "asks" the players not to do dumb stuff....but where do you draw the line? Just about anything a player just "creates" will disrupt the game....unless it is so pointless and useless not to matter.
Now, all that being said, I do love when players add things to the game....but only limited to rumors, stories, legends, fairy tales, tall tales, songs and stories. And while the player is free to "say anything", they understand and accept that roughly 99% of whatever they say is wrong or at best a half truth.