He exaggerate only the part in the prologue. You can headcanon what you want though.
Varric fudges ALOT for Cassandra's benefit. There was a cut line with him talking to Hawke.
Varric: I told her everything.
Hawke: Everything?
Varric: Don't worry, I left out the part about us...
It made it onto the romance thread concerning someone remembering Varric saying he finds humans to be unattractive but calling Isabella hot. It's not much to go on since it was cut, but there's other stuff, like everyone saying Meredith's gone nuts, but until the final boss no actual scenes of her doing anything crazy.
A lot of it, though, I interpreted to be what Cassandra pictured based on what Varric said. She may be picturing qunari as all looking the same and elves as being funny-looking.
Although with their high, wide-set eyes I thought they looked deer-like, which I thought was nifty.