When my kids were that age, we appointed one of their favourite soft toys as a special guardian to look after them when they were in bed. This worked a treat, you just have to have a talk with the toy while the child is listening about how they have to look after X and make them not scared. It sounds really daft, but I have passed this on to a few colleagues, and it seems to work. At that age, they have a really vivid imagination which on one hand is what makes them frightened in the first place, but it is useful on the other hand as they totally believe that the toy has special protection powers!!
It is really hard, because although the girls will need set boundaries, they will both be feeling very insecure. I would do what works best for you as a family, and not what everyone else says you should do. Whilst you don't want to develop bad habits for the future, put yourself in that little ones shoes, would you want to be shut away on your own when you are scared and unsettled?