Qin Shi Huang’s Mausoleum was originally recorded as being a kingdom in its own right. He was reportedly entombed in a buried city with a massive standing army and with rivers of mercury flowing throughout the highly detailed structures. The sheer extreme fantastical descriptions of the tomb and process of creating it had led to individuals long after its creation to consider that something remotely of this magnitude simply wasn’t true and was more imagination than reality. But the discovery of the terracotta soldiers in the 70’s and what excavation has been performed has seemed to at least give some form of credibility to the original records. This isn’t to say that the records were without exaggeration or imagination, just that they’re a bit more based in truth than what may have been previously considered.
Similarly, there are mythical creatures like the basilisk, a crowned serpent that could supposedly paralyze an individual with a glance, and that have records touching back to Pliny the Elder. Again, there’s no shortage of imaginative depictions surrounding the idea of a basilisk (an obvious one being the “head of a chicken”), but - to my knowledge - there’s been some acceptance that these early recording were simply attempting to convey the existence/discovery of the king cobra (a characteristically crowned snake known to spit venom in the eyes of those within its range in order to incapacitate them) and that some features were exaggerated or the specifics of what was being conveyed in these records were initially being “lost in translation” by later reviewers, and that this ultimately led to the basilisk being the mythical creature we consider today.
Under this line of thinking, what are some other particularly noteworthy/interesting examples of seemingly overly imaginative records being based a bit more in truth than what may have been initially appreciated? (Essentially my thoughts are that there exist enormous hurdles when we attempt to understand written record. These hurdles could be translation issues, incomplete information, inability of the individual creating the record to adequately describe what it is they’re attempting to record, etc… These issues, all summed together, may - and very likely have - drastically alter how we interpret what the record is attempting to describe and convey. The alteration is to such a degree that the message becomes seemingly ridiculous or imaginative. But more careful later review as these issues are fixed - we get more information, we have more useful translations, etc - shine light on what may actually be more cemented in truth than originally thought.)
but - to my knowledge - there’s been some acceptance that these early recording were simply attempting to convey the existence/discovery of the king cobra
The problem with this argument, and it is symptomatic of a lot of identifications like this, is that there are actually cobras in the Near East, they are prominently depicted in the iconography of Egypt. It does not really make sense for someone in the Eastern Mediterranean to be confused by the description of a cobra! This is a basic problem with a lot of these sort of two step explanations, in which you have some fantastic story, some real world things that can sort of explain it if you squint and turn your head, and so boom, that's done and sorted. It is the same basic methodology as Mr. Portokalos in My Big Fat Greek Wedding uses to prove that kimono is a Greek word (derived from chimona, "winter", when you want to wear a robe).
Incidentally this enterprise can be called "Euhemerism" after the Greek philosopher Euhemerus, who theorized that the gods were actually ancient kings whose attributes had grown in the telling. This is not always wrong, there are absolutely cases where real historical figures gain mythological characteristics (there is also the inverse, when mythological figures become interpreted as historical, for example the Chinese historian Yan Kuan famously argued on linguistic grounds that the Three Sovereigns and Five Emperors were deities who became interpreted in a historical manner) but it requires a lot of care and context.
That aside, yes! There are absolutely cases where texts and stories that were widely doubted have been vindicated by archaeology or later research. Perhaps most famously, or infamously rather, is the case of the peoples and cultures of the Americas before Christopher Columbus. Many of the early "explorers" described fabulous sights, great kings and civilizations, Francesco de Oreana depicts the lower Amazon river as densely populated with settlements stretching for miles, and reports from Hernando de Soto's expedition tell of large cities and great kingdoms in what is now the southern United States. But writing centuries later historians cast doubt on this for reasons that could be understandable (conquistadors are not known for the scrupulous truthfulness) but were undeniably tinged with racist assumptions about the capabilities of Native Americans. But archaeology has vindicated them, the archaeology of the Amazon in particular is a very exciting field right now and has really upended the understanding of south American history in the last few decades. And there are plenty of cases like this, and one could easily argue that early scholars bear a great portion of the blame for the rise of charlatans like Graham Hancock and the "ancient astronaut theorists" reaching for fantastical explanations for sites like the moai of Easter Island.
This is really all part of the process of scientific research in the classical sense, the steady accumulation of knowledge disrupting early theories and replacing them with more durable ones.