"Far-fetched" is a compound word, spelled with a hyphen. It is not spelled as two words, it is "far-fetched," not "far fetched." I have _never_ heard it used in the verb form. I don't think it would be a good idea to use it that way. A problem with your example is that facts can't be "far-fetched." You could say "you are stretching the facts." A "far-fetched" theory or explanation is complicated and implausible. If you were going to use it as a verb, you might use it like this: "The simplest explanation of how the Nixon tape got erased is to assume that Nixon erased it. Alexander Haig far-fetched a theory about a 'sinister force,' but nobody believed it." This is _very, very_ unnatural. In fact, most readers would assume it was a typo, and that you'd meant to write "Alexander Haig mentioned a far-fetched theory about a 'sinister force...'" A natural verb to use would be "concoct:" "Alexander concocted a theory about a 'sinister force,' but nobody believed it."

To a large extent you can "verb" anything in English if the situation is casual enough. You will be understood. That being said, I can't really imagine a native using far-fetched as a verb. There are just too many other good words and expressions that serve a similar purpose. Reaching or stretching would be natural.

Only active verbs take the -ing form. Far-fetched is a static form, so you would have to say: "That fact is a bit far-fetched. I am a native speaker and that is called a 'phrasal verb' (two-worded). We do use it in common language here in the Midwest. It's not far-fetched.

No, it doesn't work like that. It's not a verb, it's just "to be far fetched". That is/was/will be for far fetched for example. For your example you could say " You are stretching the facts/truth"

Apart from the fact that it isn't natural, if it were a verb, you would need to move the 'a bit' to the end of the sentence.