Where have all the good liars gone?

I was talking to a guy yesterday. Shrek is 20 years old, and looks like... well... a troll. A big beefy balding farmboy with zero life experience. Now from previous conversations he has claimed to have been a famous bar bouncer in both Edmonton and Westlock (many shooting and stabbing stories, in addition to detailed accounts of him punishing unruly bar patrons are supposed to butress this). Now, however, he's a delivery boy where I work. That said, apparently this weekend he:

1. Returned to Westlock to visit his family for Easter weekend.
2. Was told by his sister she had been raped.
3. Was told by his sister she hadn't told their folks or the cops because 'they wouldn't do nothing'.
4. Was told by his sister he was being told because she knew he would 'do something'.
5. Was shown a picture of the raper by the sister in her yearbook, as they are both in grade 12 this year.
6. Went to the Westlock bar.
7. Found the raper drinking there.
8. Approached the raper and began a conversation about the sister. The raper then completely trash talked the sister without recognizing Shrek.
9. Shrek introduces himself as the brother of the sister, and procedes to trash-talk the raper.
10. When the raper grew tired of the trash talking and turned to leave, Shrek sucker-punched him in the back of the head, laying him out on the floor, and restoring his sisters honor.

Shrek then went on to talk about how he had started dating another model after he left his parent's place and returned to his own domicle.

I mean where do you start?

What bothers me most, I think, is Shrek's notion that I'm continuing to buy the story, even as it gets more and more conspicuously stupid. Its like listening to a six-year-old with ADHD and some sort of white-knight syndrome.

Any thoughts or ideas when dealing with exagerrators who border (or cross-borders) on delusional? Especially when they're six and a half feet tall, and approach 400 pounds?