We're all driven to fiction one way or another. Some of us write it for publication, some of us generate it to explain what we don't understand, and some of us live it. Fiorella is one of the first type, conspiracy theorists are examples of the second type, and the third type is the most interesting--people who reinvent their own lives.
Okay, we all do that to a certain extent, celebrating or mourning our lives as the mood hits us, but Fio is talking about people who live the part, like Andrew, a fellow teacher at Fio's last college gig. Fio liked Andrew a lot. She considered him a close friend--after all, he supported her when the Hand and the Hammer ganged up against her with their own fiction. But Andrew got tossed out on his ear when it was discovered he'd falsified his educational credentials.
Fio should have figured out there was a problem. Andrew was evasive when Fio tried to pin him down on his graduate studies, the academic and publishing connections he set up for her never quite panned out, and somewhere along the line she learned he was telling people people that he and Fio had known each other at another college, which wasn't true. But she disregarded these red flags because Andrew was charming and funny and told her all the inside gossip, which might have been as fake as he was.
Fiorella doesn't know what became of Andrew, but she would bet he's set up another full and fictional life somewhere. She wishes him well. He never did any harm to anyone but himself.