From what I can see (as people archeologists, scientists and so on have investigated all manner of things AND come up with evidence), many, if not all myths, have some basis in fact. Yes, as stories go down through the ages, becoming folk-tales, perhaps things become exaggerated or embellished..even certain things invented or romanticized. But it seems to me that there is no smoke without fire (not intentionally a reference to fire-breathimng dragons)
For example, people thought that Atlantis was invented, but apparently (admittedly only from tv docs I've watched), they have found underwater ruins that quite likely are the remains of that city, and also a reason why it became buried under the sea (can't remember now whether it was because of volcano, earhtquake, meteorite, tsunamis as a result of such, or what), but anyhow, some fairly cataclysmic event.
Point is, one can't rule everything out...there's always the POSSIBILITY of things being true and factual, at least to some degree.
As for gnomes under whoever's armpits...I'm not at all sure that anyone's ever claimed that as an actual occurrence. One would presumably only go to the bother of proving or disproving that, if someone had ever made the claim that there were any living under said armpit.
Tut...these discussions do get out of hand sometimes...
Science is great..all for it. And who knows, maybe one day, there WILL be definite evidence discovered to prove the existence of various mythical creatures. But don't call them fictional, unless you have sure evidence otherwise.