I think "based on imagination" is a bad description of what's going on.
By working with particularly difficult abstract concepts the student is pulled away from the idea that "a building looks like foo" and has to work with "this idea is what I have to concentrate on and then how can I use my toolset to address that idea". I think it probably works better than some slow integration of higher concept into a solid base of building. We already know what buildings look like. But the student doesn't know how to design; and design isn't about copying what buildings look like.
It is also handy for getting kids accustomed to the idea that a design can be about things completely unrelated to building and client concerns. I just saw a design competition in which the winner was, of course, the one that did something in white and blue and stated "melting ice into water reminds us that the whole world is melting." And, you know, the design didn't do that at all unless you read the paper or are already so conditioned that you interpret everything through that rediculous lens. Design isn't about copying buildings and it is no longer even about design, it is about promoting leftist dogma. If you can get a kid to think she can design a building based on "peace" you'll have no trouble getting her to spend the rest of her life spouting about how her practice is focused on shaving dead gay baby whales for Jesus.
Take the much maligned Stata Center. FoG could have provided another academic prison camp of blind offices and labs off long corridors; heck, he could have claimed that he was "sensitively responding to context". But instead he said "what does an academic department need? is that served by the linear prototype?" and then designed something else based on an abstract idea of what the client really needed, what would really suit the client's needs. Rather than copy what buildings look like, he formulated an abstract idea and designed with the tools at hand (rooms 'n' shit) to fulfill that abstract. That's what you get by designing to love and peace.