When someone tells a story you don't believe, do you pretend to believe them out of politeness, or do you point out any parts that are far-fetched or contradicting parts, etc? On the one hand I don't want to embarrass anyone, but on the other hand it's their own fault if they go around lying. I often come away thinking things like "why did I leave that idiot say that?".
The most recent questionable story I heard was this guy (who's now in his 60s) tell me about a teacher that was touchy with the students. He was 14 at the time, and one day this teacher placed his hand down on this guy's leg... the quad area. Upon this happening he said he instinctively ("like a reflex action") went to punch him, and "knocked him out"! he said the teacher then went up to the principal's office, and I asked "but he was knocked out?". He said "well, when he came out of it..." and when he brought the principal down to the class, everyone else in the class was too afraid to say the reason why he punched the teacher, and the teacher denied it. In the end the principal decided to keep the boy in his office every day for the rest of the year and gave him tuition himself, in just the two subjects that teacher taught. At some point after this that teacher said to the boy "you'll fail those subjects, you haven't a hope". In the end he got an A in both those subjects in the intercert. The story then goes that upon witnessing these results, the principal went down to that teacher's class with this boy, and in front of the class, showed the teacher his results. The principal then said "that's twice he's after proving you wrong now… if you ever lay a hand on any student in here again, I'll do what that boy did to you, myself".
Now how much of that would you believe? The other guy listening to the story pretty much acted as if he believed it also. We all probably have had something happen to us that wouldn't sound believable, we'd know not to tell it. If the above story was indeed true, I'd tell it in such a way that would omit certain hard-to-believe parts while also allowing me to get a across moral of the story.