I stumbled upon an excellent blog post about how to deal with those “family legends” – some of which are true, some not; some of which are good, some not-so-good. Sometimes it takes a whole lot of tact and diplomacy.
Katrina at Kick-Ass Genealogy says this:
When you interview your family, sooner or later you will encounter a pretty tall tale. The novice researcher gets excited at the possibility of belonging to an exotic ethnicity; the more jaded historian dismisses the stories of war-time heroics out of hand. Neither approach is particularly constructive. In this article, we’re going to walk through how to prove (or disprove) a family legend.