In working with a public pagan group that deals with the spirits on a straight-up mythic basis this discussion comes up often enough that I've developed a little model for how the two positions can be reconciled while doing damage to neither. I systematized that nicely in a post to a list today, so I thought I'd post it here as well.
1: The Cosmos is holographic - the whole is repeated within the parts. Especially, the human microcosm reflects the macrocosm.
2: The Gods exist in the macrocosm.
3: Therefor, their reflections exist in each individual human microcosm. These reflections are what Jung perceived as the 'archetypes'.
4: Thus, when we invoke the Gods, and they draw near to us, their reflection draws near to our conscious awareness. Often it is only these internal daemons of the Gods that we actually perceive in our invocations, and that can be sufficient. The Gods act as and in those reflections just as they do as and through an idol of gold. Sometimes we are able to expand our awareness outside of our microcosmic bubble, and perceive the God more directly... Those are the big events...
So, while I dislike psychological reductionism in magic and religion, preferring a directly mythic approach, my model has a nice organized place for Jung's archetypes. Remember, it's only a model...
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