A common expression, "Delusions of grandeur" is used to describe when
someone thinks they're greater than they really are. Is there a
similar expression to describe someone who thinks things in general
are BETTER than they are? For example, if I'm in a war-torn area, but
I act as if I live in the Garden Of Eden, what could be a good
"delusions of grandeur" type thing to say about me?

Living in Cloud Cuckoo Land.

People who always view situations in a positive manner are said to be
"looking at the world through rose-colored glasses."

Ridiculously over-optimistic?
Like Polyanna?

I agree with Amber-- Pollyanna is what came to my mind.

Although... we could make up a new name, like Cheney, Rumsfeld or Wolf-low-wits.

Did you recently land on an aircraft carrier with the banner "Mission
Accomplished" on it?

Just wondering...

Well, I learned something checking up on Pollyanna.  I never had
really thought about the word and vaguely assumed that Polyanna (my
assumed and incorrect spelling) was Greek  - Poly... -  and was a
lesser known mythical Greek character, maybe the positive-thinking
sister or cousin of Cassandra.

Ha!

"Pollyanna is a novel by Eleanor H. Porter which was first published
in 1913 and which has become a classic of children's literature. The
book is about a girl, Pollyanna, who goes to live with her Aunt Polly
and soon brightens up the town."
en.wikipedia.org/wiki/Pollyanna

Pollyanna sounds lovely - exactly like our own Polly (Politicalguru-ga).

She certainly brightens up our GA-laxy.

One might say that you are dominated by a sanguine humor.

If it's arrogance (rather than delusion or insanity) that prevents the
person from acknowledging the reality of their condition (which may be
obvious but reluctlanty unspoken by others) then ..."the Emperor has
no clothes"

Walking of the sunny side of the street.

Optimist.

Dreamer.

Head in the clouds.

Or, as Ensign Nellie Forbush sang in 'South Pacific',

'A Cockeyed Optimist'.