1.The story is apocryphal, and I tend to doubt that Fund would repeat a story that he knew beforehand to be false.
2. The story is a verifiable fact.
To be honest, I'm not even certain that the people who were a party to that conversation-if it is in fact genuine-would be willing to disclose their identities, seeing as how eager the Bush administration has been in the past to exact revenge upon conservatives who are courageous enough to part company with it as a matter of principle.
Either all of these anecdotes are incorrect or wild embellishments, e.g. the disdain for her counterparts in the administration with Fed. Soc. affiliations, her refusal to join that organization, her attempt to dodge important policy debates during her professional career, or they are true.
In terms of conservative credentials, John Fund-whatever his liabilities as a human being-has earned my trust, whereas President Bush has done everything within his capacity to erode it.
You haven't even begun on the possibilities. I haven't attributed bad faith to anyone (I haven't even rejected the story as necessarily false), but without a primary source, there's lots of room for misunderstanding, exaggeration, mishearing, misinterpretation, extrapolation, even innocently meant and only half-conscious embellishment to fill in the blanks. The more people a story goes through, the more possibilities for distortion.
There's a huge difference between repeating a story you know to be false and repeating a story you just don't see any reason not to accept.