I try to be 100% honest all the time and have learned to tone down being brutally honest. That gets you no where quickly.
I think white lies are a necessary evil in order to survive in a society made up of others. Here's a good example:
I used to be really into high end car audio and "crank it up" cars...(my old pickup could hit 149 db, a 747 taking off is 130). There was this kid who spent a shit load of money and time on his mustang. It had a nice body kit, great interior, awesome sound system, but he painted it bubble gum pink. It was a really great paint job, well done, polished to perfection but damn, it was SO fricken pink. He was really proud of it. We were talking with him over everything he'd done to the car and was really proud.
When the gang moved onto the next car the GF said "how can you say you liked that? christ it was horrendous"...I said "hey, I may not have liked the colour, but he did and was really proud of the job he did, who am I to burst his bubble"? Plus you kind of have to hand it to him: not many have the balls to drive around in a bright pink car!!!!