Recently there was an article in the weekend newspaper about Kate Grenville and her novel "The Secret River" - apparently she has upset some historians by claiming her book is a new kind of history. One comment focused on how Grenville used a small anecdote from Governor Phillips' diary and transposed it 25 years ahead to give it to her main character.
The historians seem to hate this kind of "licence" that fiction writers take. The other end of this spectrum is James Frey and his ilk who present their writing as the truth and then are caught out in a big way. What is truth in fiction? To me, a fictional world is "true" when the writer makes it so for me. I read Michael Connolly's books set in LA and the city comes alive in my head. "The Secret River" was the same, especially as I had been up the Hawkesbury River and could then imagine it 200 years ago through the book.
A good way to consider this issue is to think about the difference between historical fiction and historical fiction. The first is fiction set in a historical time and place - the author researches that era, and tries to make the setting as accurate as possible (to create the world of that novel), but many of the characters are made up, and some things may be changed to make the story better.
The second is history related as a story - all of the characters were real people - so it's reality via a narrative. This kind of historical novel requires a bibliography when used in schools (or at least the publisher requires a bibliography to ensure the writer got it right).
But let's face it - no matter how well researched a book is, how can you ever prove one way or another that people back then spoke, behaved and thought like that? That's fiction!
And no matter which end you start from, there is a huge grey area in the middle where anything can happen, where a good writer can work without rules and boundaries and create a terrific story.
The critics come later.