I can't speak to Pliny specifically, but you have to keep in mind that the standards for "evidence" have changed over time (and continue to change), and that the question of what is obviously "mythology" and what is part of the "natural world" is one of the categories that is being negotiated in these texts over time.

On the first point: How should one verify claims about natural world? What should count as evidence? This might seem obvious and intuitive to you today, but that's only because people today are continually exposed (especially in formal education, but also outside of it) to particular paradigms about evidence, knowledge, and facts. These "metaphysical" ideas have changed over time in thoroughly documentable ways, including in recent decades in the sciences (the universality of peer review, for example, is mostly a 20th-century thing; the idea of using statistical p-factors as the gold standard for correlation is relatively recent). In Pliny's day, there were several different, competing ways to get at "facts." Some of these are considered valid today, some are pretty sketchy. "Repeat what other people have said" is one of them — today we do frequently invoke the authority of long-dead scholars and witnesses, but we also interrogate those claims ourselves and take them a little less seriously than perhaps Pliny did. Today we would want a very high standard of evidence before we believed in humans with one giant foot (part of that is for the reason I will outline below), but it's worth asking what kind of evidence we'd accept and what Pliny could have possibly had. Obviously photographic evidence would not be available to him — but today we'd certainly want a physical sample, something that might seem straightforward and "ancient" but also involves some technological developments in many cases (esp. if you want it to be, say, refrigerated). Separately, just to highlight the differences, Pliny had no concept of "experiments," a crucial part of our modern understanding of nature. The idea of creating artificial and controlled conditions to learn facts about the natural world was antithetical to most Ancient Greek philosophers, and indeed took a lot of "selling" effort in the 17th century when people like Robert Boyle began to try and argue that it was a better way to learn about nature than, say, purely deductive philosophy.

Anyway, the general point is that Pliny's epistemology, his metaphysical conception about how you know whether things are "true" or not, is going to be pretty different almost by definition. A lot of what we call "science" today is essentially a specific epistemological approach: a way to judge what might be true and how to know that.

On the second point: today we all instantly "know" hydras, of the sort in Ancient myth, do not exist. We can rule it out essentially categorically. Why is that? It isn't because we've discovered every creature on Earth and thus know that hydras are not among them — we discover new species every year, sometimes quite dramatically bizarre ones. When we say, "these can't be real," we're really saying, if we interrogate it: "I have a model of what is likely admissible to the category of 'the natural world' and hydras don't fit into that, thus are in a separate category that I dub 'mythological beasts.'" Why don't they fit into the category? Because we all know (and are taught) that the forms of all animals have a certain relationship to one another (today this is framed evolutionarily, but this is actually a pre-evolutionary concept!), and a hydra's basic body layout contradicts any of those relationships that we know about. Notably, we don't have any vertebrates that have multiple heads (except occasional creatures with birth defects — "monsters" who do not fit the category precisely and are interesting to us for that reason, and are usually classified as "pathological" in some way). Our internal model for vertebrates is that they have bilateral symmetry, they have a single head that governs the body, and so on. Hydras break the model, thus they must be fake.

This approach is literally traceable to Linneaus, the 18th-century Swedish naturalist who came up with the taxonomic system we use today, and concluded in his first edition of Systemae Naturae that hydras were fake along exactly these lines, and that any stuffed hydras were also fakes.

Now, the "model" we use for the natural/mythological (or real/fake, or science/non-science, natural/supernatural — these are all the same sorts of dyads) isn't necessarily true. We do, sometimes, find that there are huge things missing in it, but it usually takes quite a lot of work to get people to agree that they are "real." So today modern science considers the idea of a "soul" to be in the non-science/unnatural/supernatural category, but it considers the idea of a "probabilistic quantum wave-function" to be in the science/natural category (and "spacetime continuum" and so on). There is no inherent reason to put one in one category or another — they are all pretty unintuitive ideas about what exists beyond our sensations and the "underlying reality" that exists. But we can run experiments whose results appear to indicate that some of these things are reliably observable, testable, usable concepts, and the other (the soul) is not. (Are the experiments the only way to know these things? This gets back to our metaphysics in my first point above. There have indeed been people in modern times who have questioned whether our "naturalistic bias" necessarily limits our idea of how to investigate the world, but they have not been very successful in converting other scientists.)

And there have been a few famous cases of animals thought to be mythological or extinct that were in fact discovered to be real relatively recently (e.g. in the 19th or 20th centuries). Gorillas were only known to be real to European scientists by the mid-1800s, and the panda was considered essentially legendary until the early 1910s. Today, bigfoots are not considered part of our "natural world" by scientists, but could that change? Who knows — it's not as unlikely as the hydra (we know there have been large bipedal primates in the past, and even some in the present), but there are definitely some lines of argument against it (the lack of what most would consider hard evidence, for one — but we're back to the metaphysics of what constitutes "hard evidence," again).

When I assign students pre-modern texts on the natural world, I have them try to figure out what is included in the authors' paradigm of "natural." What do they think the possibilities are? The authors' confidence in their categories in the 17th century, for example, were plainly a lot lower than ours today, because they were becoming acutely aware of how little they knew about places far away from them in the early Age of Exploration. (I have one account of a 17th-century meeting of the Royal Society of London, in which they are very, very curious about whether a rumor they heard is true: that crocodiles that can grow 6 feet long or more really are born out of an egg no larger than than a turkey's. Today we would say, sure, that seems quite possible, but you can imagine how very smart people a few hundred years back, people who had never seen a crocodile in the flesh or even in taxidermied form, might be very keen on confirming such a bizarre notion!)

Anyway, all of this is to say, it's more interesting to frame your question as "what kind of world did Pliny think he lived in?" than to ask "why did he make so much stuff up?" Because in his mind he probably didn't think he was making anything up (though even then, who knows — it's hard to establish intent and mindset, even with people today; do the COVID deniers know they are repeating nonsense, or do they think it is genuinely real? The answer will vary with the individual). The challenge of encountering bizarre historical worldviews, as the historian/philosophy Thomas Kuhn famously argued in The Structure of Scientific Revolutions, is to try and see why they made sense to very smart people in their own times. Rarely will that be obvious, especially in the case of ancient texts where we lack context. This includes not only any specific facts and assertions, but his very concept of what a fact is, what evidence is, what the enterprise of knowledge is about — his metaphysics.

The question is based on an incorrect premise; contrary to what the questioner asserts, Pliny the Elder actually "made up" very little or nothing at all himself.

It is true that Pliny's Natural History contains a wide assortment of stories that seem bizarre and fantastic to most twenty-first-century readers, but Pliny actually sourced the vast majority of these stories from the works of earlier Greek and Roman authors, who, in turn, at least in most cases, received the stories from oral tradition.

Many of the most bizarre stories Pliny retells actually come from the Greek historian Ktesias of Knidos, who worked as a physician at the royal court of the Achaemenid Empire and, in around the 390s BCE or thereabouts, wrote a work titled Indika, in which he retold many of the strange stories that he had heard about the land of India. Ktesias's Indika has not survived to the present day, but summaries of it by later authors have preserved information about its contents. Pliny the Elder was closely familiar with Ktesias's work and cites it fairly extensively in his Natural History.

The Kynokephaloi or Dog-Headed Men originate from ancient Greek folklore. They are already mentioned in Fragment 40A of the partially lost Greek hexameter poem Catalogue of Women, which dates to the Archaic Period (lasted c. 800 – c. 490 BCE) and was attributed in antiquity to the poet Hesiodos of Askre. The Greek historian Herodotos of Halikarnassos (lived c. 484 – c. 425 BCE) briefly mentions the Kynokephaloi in his Histories 4.191.4, which he wrote in around the late 430s and early 420s BCE. Naturally, Ktesias wrote about them extensively in his Indika. Pliny the Elder most likely got most of his information about the Kynokephaloi from Ktesias.

The Skiapodes or Monopods also originate from Greek folklore. The earliest extant mention of them comes from the Athenian comic playwright Aristophanes (lived c. 446 – c. 386 BCE) in his comedy The Birds (specifically in line 1553), which was first performed in Athens at the City Dionysia in 414 BCE. Ktesias also wrote about the Skiapodes in his Indika and Pliny the Elder expressly cites Ktesias's description of them in his Natural History 7.23.

For those who are interested in learning more about this, I wrote a blog post in August 2021 in which I discuss the ancient primary sources that mention or describe some of the more bizarre creatures from ancient Greek folklore, including the Kynokephaloi and the Skiapodes, in much greater depth.

In any case, the real question here should not be why Pliny "made stuff up" (since he mostly didn't), but rather why Pliny saw fit to repeat all kinds of wild stories that he read in the works of earlier authors. One possible explanation is, of course, that Pliny was simply a bit gullible and willing to believe almost anything he read, no matter how ridiculous or absurd. Aside from gullibility, however, there are at least two plausible motives for why he may have chosen to repeat these stories.

The first plausible motive is that, by the time Pliny was writing his Natural History in the first century CE, the works of authors like Hesiodos, Herodotos, Aristophanes, and Ktesias were widely revered throughout the Greek and Roman cultural spheres as eminent classics. Pliny wrote his Natural History partly in order to showcase his own encyclopedic knowledge and erudition. He may therefore have wanted to showcase his knowledge of classic Greek authors by citing and summarizing their descriptions of these bizarre creatures.

The second plausible motive is that all the bizarre races and creatures that Pliny describes are said to inhabit distant lands at the farthest edges of what the ancient Greeks and Romans regarded as the known world. Pliny may have therefore wished to give his readers a vivid impression of just how utterly distant and strange the lands he writes about supposedly are and thereby impress them with the fact that he has knowledge about such distant lands. In other words, the strangeness of the stories may actually be part of the point.

As an extension of this, Pliny may also be trying to convey to his readers a sense of the might and glory of the Roman Empire by impressing upon them the fact that it is through the dominion of the empire that information about these bizarre and distant lands has become available to a Roman aristocrat such as himself.