Honesty is such a lonely word

Okay, I'll admit it... I need some advice.
You, my loyal readers, are who I am turning to. Be anonymous if you like, but I'd like your opinion.

Where do you think one should draw the line between honesty and sparing someone's feelings?

I strive to live an honest life (although my fish have been known to get bigger as the stories get retold), but I also strive not to harm others.

If being honest with someone meant you were going to hurt them badly, is it worth it?
Or is avoidance a feasible answer?
Is lying by omission worse than lying to someone's face?

And....go!