For people to have a controversial or negative history almost exclusively means some group of people were wronged in that process (segregation, genocide, racism, sexism, weird scientific testing, the list is endless). By not acknowledging this past, the modern people learning only a singular, positive truth don't ever recognize the lasting effects the negative had on others. This oftentimes leads to the perpetuation of that same narrative that may have ultimately led to the "negative" past in the first place.

Aside from this, historians strive to recognize flaws in nearly everything we do. For virtually every example proving an historical case, there is evidence to the contrary. Historical truth is more important for one reason because The record can always be updated with new evidence. If you only develop a thought-based "truth" it becomes a slippery slope. All evidence counter to your narrative must be falsified, skewed, or distorted in keeping up what, in essence, has become a deliberate lie.

You're asking a philosophical question to which there can't be a yes or no answer.

The study of history has never truly been the study of discovering immutable, unequivocal facts in order to definitively reconstruct events of the past; rather it is the discipline of examining narratives of the past and interpreting them. It's less about objective truth and more about investigation. That said, there are of course things that are generally accepted as fact based on empirical evidence, and there are some theories which carry more weight and accuracy than others based on the methodology which led to those theories, but the point stands.

The problem with what you're describing comes when history is used, or one might term it misused. History can of course be embellished and moulded to fit many different narratives, but this is not always a good thing. A decent example of this is probably the prevalent theory of the 1970s-1990s of the prehistoric matriarchy, which is a theory that states that matriarchy was the way of the world before agricultural practices usurped it with patriarchy. In theory, this idea gave women a history in which they were powerful and gave them more of a right to demand equal rights and fair treatment, because it was something they had once had. In practice, this idea relegates women to mothers and fertile beings, and ignores the argument that women inherently have a right to demand equal rights and fair treatment because they are owed it after centuries of mistreatment, rather than being owed it because it was taken from them.

So, my answer to your question would be that no, it isn't wrong to create false or embellished histories to believe if their own history is negative or not prideful, because the nature of history means that it is ripe for interpretation and reinvention, but I would argue that it is dangerous and often leads to nationalism. The creation of positive or successful historical narratives in place of actual truth for conquered or oppressed nations, or even just nations whose histories are not exactly glorious, can be extremely detrimental - for example, see the creation of a false nationalistic narrative in pre-Nazi Germany, in which ideals of German history as being militarily mighty and unfairly oppressed were constructed in response to their loss of World War 1 and led to increased nationalist fervour. Of course this did not cause World War 2, but it cannot be ignored as a contributing factor.

I would also say that it is not important for a people to think that they have a good or proud history, as the importance of the past in constructing a modern identity has been categorically overstated. For example, I'm Welsh. My people has a history of being conquered and oppressed, and that is our history. I have no interest in the construction of a pseudo neo-Celtic identity, which many other Welsh people, mostly in the diaspora, have created. As a historian, I see history as valuable primarily for the lessons it can teach us rather than for how it reflects on our modern notions of who we are. This, of course, is personal opinion and not the opinion of all historians, and the answer you get will differ depending on who you ask - as I said at the beginning, this is not a question you'll get a definitive answer to because it is philosophical and subjective.