One Question: What is fact and what is truth?

I was watching CBS Sunday Morning this weekend and saw Rosanne Cash being interviewed. She was talking about her new, acclaimed album, Black Cadillac, that I really want to get. The interviewer, Russ Mitchell, indicated that it must have been a difficult album to write and record. She indicated that it was easier because the words rhymed, which somehow put them more at arm's length. She indicated that the record, inspired by the deaths of her mother, Vivian, her father Johnny, and her stepmother, June Carter, wasn't about them, but was a reflection of what she felt about them. "If I say, Russ, this is how I felt about..." that would have been tough for her. She made the distinction between what is fact (i.e., factually accurate) and what is truth (the essence.)

So, that's my question: in works of art, when does it matter that it is fact versus that it's truth? Should James Frey be chastized because some of the facts aren't accurate, if there is "truth" in A Million Little Pieces?
How about biopics? Surely, characters are blended, timelines altered. When does it matter? Some believe that Denzel Washington lost an Oscar for The Hurricane because of factual errors in the script. The basketball film Glory Road has been Disneyfied; the team didn't get all of its black playerrs in one season, nor did Texas western win in coach Haskins' first season, in my view, unnecessary distortions of the story.
For documentaries, does one stage events because they're "emotionally true", as I heard happened in Grizzly Man?
Historical biographies: one doesn't know the real dialogue. I remember this distinctly from reading and especially watching Roots.

I'd love your feedback: when does truth trump facts in the arts?
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And speaking of facts and the arts, didn't ABC News erred Wednesday? They were reporting on how the Oscar nominations had incited the Christian right, and mentioned Brokeback Mountain (and considered, even by the Christian right, to be well-made, which, a representative said, was the problem), Capote, and Transamerica. The first two are "gay-themed", but I thought Transamerica (which I haven't seen yet) was about gender identification.