You are quite correct that she's living in a damn fairy tale world with the belief that if two people are "meant to be together" then they will be. It doesn't work like that. There is no such thing as "fate" and there is no cosmic force that determines which two people are supposed to be together.
That being said, you're just as deluded and living in a fairy tale world if you think that a long distance relationship will work and that she's supposed to just wait around for you while you're away at school.
NEITHER option is realistic, but I have to be honest with you here. Her plan has the greater chance of success if the goal is to see the two of you together eventually. The logical course of action is to end your romantic involvement and be "just friends" while retaining the understanding that if you both want to try again some day, that would be cool.
I'm sorry to be the one to have to tell you this, White Boy, but your relationship with her is essentially over. Your choices now are how you end it. You can end it on good terms and part ways still loving each other, or you can try to cling desperately to her across a great distance and discover for yourself just how painful an experience that is. And when the day comes that either you or her find somebody else who is right there close by, you can both discover for yourselves that trying so hard to make the relationship work just makes it hurt SO much more when it fails.
I've given you my advice, but with an almost absolute certainty, I know that you won't take it. Do what you think you must, just know that years from now you'll look back on this moment and say to yourself "fuck... Galen was right... I shoulda listened..."
But you won't listen, because you're young and in love and I'm just some old bastard on the Internet who doesn't know what he's talking about, right? I don't know you and your girl and how much you love each other and how strong your committment is and blah blah blah. It doesn't matter that the advantage of being older is that I've already done all this shit and bought the fucking t-shirt too. No, no, you guys are "different" and you'll TOTALLY beat the odds. Riiight.
For your sake (and hers), I sincerely hope you prove me wrong. But you'll understand if I don't hold my breath.
All My Hate,