Wonderful post, Dan, and I agree. God works through the Bible but the Bible is not God! We shouldn't worship it. God worked through fallable human beings to create scripture, just as he works through fallable humans now to accomplish his purposes.
And as far as taking every single story literally, we have only to look to Jesus to discover that God uses parables that were not real events to pass along his message. Why should the bible be any different?
You make so many great points, I'm marking your post for future reference and re-reading.