Not at all literally. Midrash helps you understand the text, but it is still secondary to the text. And no less a rabbinic scholar than Rambam (Maimonides) taught that the beginning chapters of Genesis could be read allegorically - so much more so he folk tales.
Depends on the brand of Judaism.
Orthodox Jews will (likely) take this passage to be literal.
Reform Jews will (likely) take this passage to be metaphor.