When is a lie not a lie?

Or more accurately, is it okay to tell a 'white lie'? I was challenged by this the other day at the house group I attend. We were talking about the characteristics of a holy life, or being holy, and we got on to the subject of telling the truth. I have to say that I am quite black and white (pardon the pun) and tend to simplify my response by affirming my belief that there is no such things as 'degrees of sin', sin is sin and that is the end of it. I have preached on this more than once and am not shy about my opinion. But is there a time when a white-lie actually is better than the truth? The group I was with discussed the infamous 'does my bum look big in this' question and response (when the person asking's bottom does actually look too big in a particular article of clothing) and concluded that actually in such matters the truth, the polite and humble truth, was the best response. But what about in other more difficult situations? At the other extreme of the apparel and figure question is 'am I going to die?' What do you say when asked by someone who is terminally ill? How do you respond when it is a child, a parent, a sibling, a close friend? What do we say? To be frank I am not sure and I guess will not be sure about this until I get asked the question. 

With the benefit of not being exposed to such a situation in my life since my teens I will try and address this. If I were to look at it from the person to whom the bad news is going to be delivered then I can honestly say that I would want people to be honest with me. I would want to get my house in order, to perhaps do some things and say some things that I had left undone and unsaid. Also I guess that as an adult Christian who believes without a doubt that God has promised me eternal life, death holds a different meaning to me than the non-believer, the agnostic or the atheist. So for me the truth is a blessing in that situation, but what about a child, what about if it was my child? I would like to think that I would be honest with them, but when its all said and done I don't really know. I like to hold on to my belief that the truth is always best, and that when couched in love and humility, God will hold that precious truth and ensure that all who own it will be blessed by it.