Great topic.
I don't remember too many myths, but I can still vividly remember the heated arguments that the "Genesis is 16-bit it's better than Nintendo!!!" and "No way Genesis SUCKS Nintendo has Mario and more games it rules!!" followed by "Genesis does what NintenDON'T!!" to end it.
-There was this kid at a summer camp I went to as a kid that was easily the biggest liar I have ever met to this day. The kid would spit out the biggest loads of garbage about anything kids were into, telling us that if you got to the last level in the TMNT arcade game without dying once, Casey Jones and Usagi Yojimbo would come out and help you win.
-At another summer camp some years later (1992), a kid told me he played Street Fighter III at a movie theater, and described some of the characters in detail. The kid didn't know anything about SF2 (I think I must have been the only kid my age that could play it where I lived), and it turns out he wasn't lying...the theater really DID have a "Street Fighter III" machine. Someone made their own cheap-looking marquee for a cab and threw SF2' CE inside it. I don't know how the kid could have missed the SF2 title screen, though.
-Before the PS2 was released in the U.S., I was talking to an EB manager about the E3 show I was about to go to later that week. He feeds me a bunch of hyped-up crap about the PS2, and I tell him it's all bull, and I'll be glad to come back to the store with my Japanese PS2 and show him (I lived less than five minutes away) if he wanted.

This was then met with more lies about how he saw the PS2 at an EB-only trade show and that the U.S. version was better than the Japanese version. Right.