The Bible seems to be a combination of myth (Jonah, the Ark, etc.) and what appears to be true history, often described in a mind-numbing, excruciating, almost anal detail rarely seen in invented stories. A good portion of the Old Testament appears to have been written by court reporters or accountants.

An excellent book on this subject is "Isaac Asimov's Guide to the Bible," which tracks the history chapter by chapter. Despite the author's professed atheism, he treats the subject with respect, and this book is a good reference regardless of one's beliefs.

The best literature speaks to the universal human condition, and teaches important lessons regardless of its historical truth. Joseph Campbell wrote far more on this subject than I have ever read, and you could discuss it for hours.

In the fantasy book "Sandman" by Neil Gaiman, there was a story where Shakespeare performed "A Midsummer Night's Dream" before an audience consisting of the actual Faerie Court. The supernatural creatures in the audience watch the play, enraptured. One (the real Puck) cries out, "This is magnificent, and it is true! It never happened, yet it is still true. What magic art is this?"

This is the essence of myth, and of a good story.