How do you feel about those who stretch the truth?

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I, myself, am a very honest person...sometimes too honest for people to accept...but you will always get the truth out of me, because I really can't stand liars. And there are those people who take a simple subject, and stretch the truth, to make it more grandiose, or to make it sound like they know more than you, or just because they have nothing better to say. I had a friend like that, you never knew if what she was telling you was the truth...she was a really good person, would give you the shirt off her back, but because I never was able to trust our conversations, I had to back off from our friendship. It would drive me totally nuts. Now I have an aunt who does the same thing. Everything we bring up in front of her she would add her "I knows" to it, and proceed to tell us something about the subject, that we know she is making up. Even her daughter now steps in, and says "it's not like that at all" and you can see her frustration. It's to the point that I don't want to do anything for her, and would actually like to since her husband just passed away, but I can only take so much of it. Is this a sickness?