This whole thread has got me thinking...
I read an interesting way to look at "miracles" a while ago and I think the same can also be applied to legends: When deciding what to believe and what not to believe, you must determine which is the more likely "miracle"...that the event happened or that the source got his information wrong?
So looking at this legend, we have to consider what is more likely with each "fact": Did the source get it wrong or did the event that lead to that fact actually happen as reported.
I don't have the time (or the desire) to go too indepth in this sort of analysis...but from the half-dozen or so accounts I've read, I think we can safely accept the following facts:
From 1764-1767, a significant number of people and animals were brutally killed in the French country-side either by an animal, several animals or humans dressed to look like animals. We'll collectively call these "creatures".
These creatures were or appeared to be similar to wolves.
Many hunters, soldiers and adventurers became involved in hunting the creature(s) and apparently succeeded (at least partially) in 1767.
That's about it. There are a lot of contradicting facts and I can't determine which sources are more believable. The large "wolf" is really the only common vein in the stories. But there seem to be enough accounts that point away from a wolf (some reports indicate human involvement) to even pull that into question.
So this gets me to thinking about D&D...how much misinformation do you present to your players? How often is the information presented wild rumors, exagerated eye-witness accounts or even deliberate lies?
Usually I'm pretty "honest" with my players. If I tell them that a massive "white wolf" was attacking herds of cattle, they can take it in good faith that they are going to be tracking down a winter wolf(now...I've been known to mislead about what that creature is doing or what is really behind it). But looking at this legend, accurate accounts from eye-witnesses are probably the exception. Accurate accounts from second hand sources are probably unheard of.
Another story that got me thinking about this is Old Faithful (the geyser in Yellowstone national park for those of you who aren't familliar with America). I was watching a show about its discovery on the History channel. The most interesting thing about it was that the geyser and all the other geothermal activity in the area was originally a legend. Scientists in the eastern United States couldn't believe that such a place could exist. It wasn't until an expedition was mounted and the area was surveyed, PHOTOGRAPHED and drawn by a professional artist that it was commonly accepted to truly exist.
This made me think that I should instill some sort of skeptism in my players. But how? Send them on wild goose chases? What fun would that be.
So...do you DMs have legendary creatures, items, places or people in your games that are truly just legends? Do they not exist at all? Are they extinct? Just greatly exagerrated? How do you instill a sense of skepticism and wonder without sending the PCs on wild goose chases?