My mother told me that we were descended from a beautiful French gypsy woman who arrived in the village long, long ago on the arm of a dashing sea captain. This would be lovely if true, but for as far back as I can find, my ancestors on that side of the family are all staid and industrious Suffolk Ag Labs. Would that I could find this colourful gypsy woman dancing into my tree but as yet she too remains in the realms of 'family law' and I suspect that is where she will stay. 
Family legends can and I suspect often do arise from a chance remark. A friend once told me that it was of little use trying to trace her mother's family since they had been gypsies. A year or two later Jean had a trip back to England to see her mother. The subject of family history came up and Jean referred her mother to the fact that Nan had been a gypsy. Her mother was really surprised and said, 'Where did you get that from?'
Jean then said that it was her mother herself that had told her. Her mum thought for a bit and then burst out laughing.
Fortunately she recalled having once said that her mother was 'a bit of a gypsy' meaning gathering things.
An aunt once told me that my gt.grandfather was a gamekeeper, which we know to be true since I have a photo of him wearing a gamekeeper's uniform. However when I got his death certificate it had been a lung problem almost certainly Phthisis. I then looked up the local paper for that week wondering if there was anything in the story. What I found was that the whole area around East Retford had been inundated with torrential rains which caused floods everywhere.
Another aunt then told me that he had been chasing a poacher but had misjudged the size of a small river when trying to jump it and had fallen in, caught a severe cold and died from that. Again the story was being stretched. But you can see how misunderstandings can easily creep into family stories and of course we all want to hear the colourful side.