It’s uncanny how similar your story is to mine: I once had a friend with a similar tendency to embiggen reality… he started with lightly embroidering his stories, but over the years the fantasy took more and more precedence until you weren’t sure what was left of reality. It happened so gradually none of us knew how to react, should we burst his bubble? somehow it always seemed too harsh a reaction. One day he came to visit and said the most awful lies about our common friends… I never saw him again. Last I heard of him he had wholeheartedly subscribed to fascist ideas such as eugenics, etc.