[This might be more GD material…no issue with moving it…]
Cracked said something that struct me as very curious today:
Or would it utterly liberating?
If this were one of Skald’s silly polls, would you vote to do a Bruce Almighty crossed with Liar Liar and decree with your God-powers that nobody could lie anymore? What would happen if that were to come to pass?
I don’t think a sudden change to this society will work out well. There will be a lot of anger. A lot won’t get done if people are afraid of the consequences of their honesty. But all in all it depends on what you mean by honesty. A fake smile isn’t exactly a great act of dishonesty.
Since we have no control over whether we are honest, I’d call this a dystopia.
I think you have to first decide if you can be honest without saying everything that’s on your mind all the time.
For example, if I walk into a room and hate the clothes you’re wearing, can I just keep that to myself, or do I have to tell you.
Also, along with this, you’ll have to make a ruling on if lying by omission is considered not being honest. If you think your husband was out bowling last night, but I know where he really was, do I have to tell you if I wasn’t directly asked (I wasn’t lying I just didn’t tell you)?
On rethinking, I suppose those are one in the same, but the OP is going to have to make a ruling.
“Divergent” includes a faction that never lies. I guess it works for them, although they all volunteered to live that way (at least in the mind of Veronica Roth). But questions like, “Do I look fat in these slacks” are traps. So people would also have to agree not to ask such questions. But all in all, I think it is a dystopia (as Roth clearly did).
Incidentally, there is some evidence that smiling can make you feel happier.
No, not compelled to divulge the truth unless directly coerced.
I want to be part of the research team experimenting with #4. 
To the OP, this question of “is honesty the best policy?” has often been used as a sitcom plot. Almost without exception, the moral of the story seems to be that 100% honesty is a Bad Thing, as it hurts people’s feelings. Think about it – if everyone answered honestly when their wife/girlfriend asks if a certain dress makes their ass look too fat, human reproduction would come to an end.
I guess, in a fully enlightened society, advanced humans would be able to accept honest criticism without freaking out. But society’s currently nowhere near that level of enlightenment.