Destiny brings to mind a very important thing that should accompany truth, which is the wisdom to use it. Christ, as chris said, didn't avoid truth even if the truth would increase tension or make a situation more awkward, but He also had the wisdom to always speak it in love.
Nikki, with the co-worker thing, it's tough to be honest. You would be right to tell her she's not living up to her responsibilities at work. However, telling her would be painful to her. Not only will she be in pain, but if you tell her, now you have the responsibility to first still love her and second help her is she wants to get better.
However, what is the difference between that situation, and the terms many have come to Christ? When we come to Christ, we have to recognize we aren't perfect or we aren't in control, and that truth can be Very painful to take. However, only when that truth is accepted can things get better. I think this is part of the reason we are told in James chapter 1 to ask and seek wisdom.
Quath, I think you are right that in many cases people don't want or just aren't ready to hear the truth. However, if I'm having a bad day, and you ask how I'm doing, I'll tell you exactly what's going on. I'm not saying I'm Mr. Perfect honesty, because that couldn't be further from the truth, but if honesty is what we want, we can change the expected norm.