To Tall Tale or not to Tall Tale

The last several months, I've been itching to write tall tales or fairy tales.  I want to capture some of the story telling, the oral traditions, that I grew up with.  But I've been having a lot of trouble doing it, and it's taken me an embarrassingly long time but I think I've articulated why I'm having such trouble.

A common feature in fairy tales, one of the techniques that signals that you're reading a fairy tale, is that the characters are flat or archetypal.  The description is minimal to the point of only describing the setting in terms of "the woods" or "the castle", only describing characters as "lovely" or "sad", and only noting when colors are white, black, or red.  No turquoise.  No articulated conflicted emotions.  No settings the reader doesn't already have a picture of.  The bulk is left to the reader's imagination, allowing them to cast themselves as the main character and the setting as their home town.

These makes for good short tales and fables, but not so much for full novels, especially not the kind I write with introspection and description and world building.  A novel where the characters don't get flushed out would be almost impressive in how the author managed to avoid it, and I would find it dull if it went for long stretches without a character to latch onto. 

I've been wondering if fairy tales and the kind of thing I usually write are mutually exclusive.  I can write my own short fairy tales, but I wonder if I can incorporate them into a novel without fundamentally changing one or both of the forms, without stripping them of what attracts me to them.  I can do a novelization of a fairy tale with all the tangents and back story and character growth and world building that I love to write, but I don't know how to do that without losing some of the lyricism, the dream logic, and perhaps some of the magic that draws me to fairy tales. 

Right now, I'm working instead on characters telling stories--kind of a "Big Fish" thing.  I like this because part of what makes tall tales so engaging is that the storyteller puts themselves into the story, casting themselves as a hero, and part of what makes them so interesting is to see how the stories they tell interact with or deepen their character.  My grandfather once found a rare, exotic butterfly on his trumpet plant in his back yard.  Just opening and closing its wings.  He called the Dallas Zoo and a zookeeper came out to his back yard, thanking my granddad profusely for finding the escaped butterfly. 

Another way I've been playing with it is to have tales interjected throughout as explanation or even exposition.  "Why does this happen?  Why does this matter?  Well, let me tell you a story..."  It gives some voice, some humor to info dumps, making them more engaging.