I guess I'm thinking more of the way that stories about holy men (Jesus, Apollonius of Tyana) and heroes (Heracles, Odysseus) are used by those who tell and listen to them.
Nobody would look to the Iliad, for example, for an accurate historical account of the Trojan War. What some scholars suspect, though, is that the Iliad helped to transmit truths about proper behavior toward the Gods and daily life. It also portrayed the gods in ways that would confirm general ideas about their identities and characters.
Sometime stories communicate things we hold to be true, even in the guise of fictional trappings. Tolkien, for example, treated his Middle Earth stories as if they actually happened, but in a different time. Xians frequently note the similarity of the beginning of the Silmarillion, with the story of Illuvatar and Melkor, to conventional xian stories about the beginnings of everything. In fact, since we know Tolkien was a believer and good friends with other xian luminaries like C.S. Lewis, it's subtlely tempting to let Tolkien's narrative flesh out the sketchy parts of what xianity asserts about the beginning (the fall of lucifer etc.).
It feels like there's some theological truth in Tolkien's story, even if the details aren't factually true.
The icelandic sagas, recently translated into English, offer a fascinating series of accounts of the settling of Iceland. They also contain all sorts of tall tales and literary figures. Egil Skallagrimsson, for example, is one of Iceland's great figures. He's described as wily but physically immensely powerful, and stories about him include fantastic details about his prodigious strength in his youth, particularly in wrestling with others. There are some details about his life and doings that seem more or less plausible, and some that aren't. The idea of such a literary portrait is to convey what kind of a person someone was through the telling of stories about them.
This is the same phenomenon you find in sensationalist historical accounts, like those Time-Life series they used to sell on television. The commercials for them invariably included colorful details about folks. Remember the Old West series? The narrator in the commercial says of one John Wesley Hardin that he was "so mean, he once shot a man for snoring too loud!"
Could be factual, could be fictional. The point is to show how mean that guy was.
If the stories about Jesus are intended primarily to portray certain character qualities believed to be true of him (e.g., he was the son of God, he was a perfect man, he was a wise judge, he was a healer, etc.), then the details of those stories may fudge a bit on the facts to get the point across. That practice, incidentally, would not have been an issue for 1st-century audiences. They would expect it as part of an oral culture. It would not lessen their belief in the essential truth of the portrait.
It's like my father-in-law trying to tell a story about his life as a young man, only to be interrupted by my mother-in-law:
"Jerry, that's not what happened. We did x before y happened, remember?"
"So your story isn't quite right, Dear."
"Do you want it to be right, or do you want it to be good?"