In my quest to finish my thesis, one of the central works I've been wanting to read for quite some time was John J. Collins' seminal work, The Apocalyptic Imagination: An Introduction to Jewish Apocalyptic Literature. If you're doing any study in the field of Jewish apocalyptic literature, this is the overview to work through - as it covers issues surrounding the genre, including early Enochic literature, Daniel, and Qumran - as well as other oracles and testaments.
In his chapter on the book of Daniel, while discussing the historicity of the book, Collins notes several of the "historical problems" with the book. Collins sites the lack of a historical figure named Darius the Mede, as well as the tale of Nebuchadnezzar's madness which adapts a tradition ascribed to another Babylonian king, Nabonidus.
In any event, Collins offers the following measured caution about literalism and historicity:
What is at issue in all this is not the veracity of the "word of God," as literalists usually construe it, but a question of genre. An assumption that the "word of God" must be factual historical reporting, and cannot be literary fiction, is theologically unwarranted. Whether or not a given passage is historically accurate is a question of relative probability in view of our total evidence. Nothing is gained by straining credibility in the hope of saving the historical appearances. [p. 86]
The ramifications of what Collins is saying is twofold. First, we need to be careful in connecting "truth" and historical veracity. Something does not have to be historically accurate in order to be true. Jesus spoke truth using literary fiction, namely the parables. They were not any less true merely because they were stories. Could not some of the stories we approach as "history," in fact be more parabolic in nature [as some people conceive Job to be]? Second, certain places in Scripture should not be seen as what we often think of as "history" - an accurate photographic rendering of what took place. Rather, we need to carefully approach certain portions of the Scriptures more as a painting - a work of editorial brilliance capturing the essence of things that took place.
I wonder if we actually do more damage to the text - even "straining credibility" - by trying to force the Scriptures into rigidly constructed categories.