Just wondering if people in the past considered Arthur to be real or they knew full well he was a myth. Also, did Romans do the same but with heroes like Aeneas, Hercules, etc. or was it simply comparisons?
The Tudor dynasty claimed descent from King Arthur, as did the Stuart dynasty, who shared some common ancestry with them. Henry VII's grandfather Owen Tudor was a cousin of Owain Glyndwr, the last Welshman to hold the title 'Prince of Wales.'
Glyndŵr claimed to be descended from Cadwaladr, the 7th century King of Gwynedd (a Saxon era Welsh Kingdom, which rose to become the most prominent Welsh Kingdom prior to the English take over of Wales) Calwaladr is portrayed in Medieval literature, such as G. Monmouth's 'History of the Kings of Britain', as being the last in the line of the legendary Kings of the Britons (Britons in this sense meaning Romano-Celts.) A line which supposedly included King Arthur.
Other English Monarchs before Henry VII had used the legend of King Arthur for political purposes, to establish the right of one Monarch to rule over England and Wales simultaneously for example. But Henry VII is the first to openly claim a blood-line descent and to use that for propaganda purposes. The motive for this is probably to compensate for the rather obscure figure of Owen Tudor, who despite being descended from Welsh Royalty was a mere solider and courtier when he secretly married Henry V's widow and Henry VII's grandmother Catherine of Valois.