My little nephew and nieces are afraid of the dark and I just put a night light when they sleep over to help them overcome the fear. I think the best way to overcome the fear is to take them with you to the basement at night and show them nothing is there. That's how I got over my fear when I was young, at least.
Dude if I did that with my nice and nephew they would probably start screaming and blame it on me. I remember when I like needed the light on to sleep, now I can't sleep if its on!
I raised two of my younger brothers and helped them overcome this fear. By telling them there is nothing in the dark will only make them feel like they have lost you're support, which is a bad thing. Now they feel as if they have no aid to vanquish their fear.
Instead try embracing their creative imagination, tell them a story about a night time guardian who protects them from evil monsters, and that their blanket is made out of indestructible material that will harm the monsters if they touch it. This will make the child feel both secure and protected, and also feed his creativity.
There is nothing to fear about the dark its just the absence of light not the absence of safety or peace. You know why some animals and other creatures only move about at night? Its because they want to get away from man, think about that.
Fear of the dark is understandable. It is partially instinctive, we're not adapted for it, so it was best that our ancestors stayed put at night, partly due to predators, partly the simple probability of being injured in the dark.
This is further reinforced by our emphasis on vision. It is by far our best primary sense. Without it, we're at a considerable disadvantage, and children are very aware of this.