MacAllister said:
Hmm--How about I play devil's advocate?
Why one earth are we falling apart over a novelization of the guy's life? Because the publisher called it a memoir? But aren't we all pretty much convinced that the word on the spine is really just to tell clerks where to shelve it?
Consider The Amityville Horror--is it less effective as a novel? A less seminal work of horror? It was originally published as nonfiction, too.
I think the problem people have is that non-fiction says "this is real -- that life is stranger than fiction!" People (however naive they are) tend to be drawn to true-life stories that are bizarre and twisted -- we are all reality TV/news/true story junkies. On top of it, there's an idea that someone cuts in line by calling fiction non-fiction. Out of 175,000 books published every year, only less than 5000 are fiction. The odds are stacked against novelists. So for a "novelist" to fake it and call his novel "non-fiction," he increases his odds of getting published. Not to mention, the quality "requirements" of non-fiction is less restricted than fiction. Non-fiction are more likely to be judged on content than on the quality of writing.
It has happened before and it will happen again (e.g. Amityville Horror). The question really is: is it ethical? Or does it fall in the category of "if it sells books, who cares?"
There's also the concept of crediblity. If someone could deliberately fabricate stories and call it real, how will we ever trust anyone who writes non-fiction? The answer probably is: You shouldn't trust everything you read anyway. But in this cynical world, I think something like what Frey did could only worsen this cynicism. Liars become winners, and nobody wants to play by the rules anymore.
So, I think the argument isn't whether a book is just as good or better as a novel than as "non-fiction." I think the issue is much bigger than that. Is publishing following the paths of TV and movies, where "truths" doesn't really that much compared to "entertainment value"?