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The amazing thing to me is that many, many of the bizarre incidents in the movie actually took place in real life.
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No it's not. The Dude is based on a real person the Coen Bros. know, but the plot is completely fictional.
wiki on TBL
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Read the book, seriously. Many of the events in the movie are based on real events, including two middle-aged guys going to a teenager's house with his homework in a baggie to "brace" him about a stolen car.
The book's authors INTERVIEWED the kid, and the two guys who braced him.
Also based in reality -- Walter is an amalgamation of 3 guys, one of whom being a professor at Southern Cal who compares everything to Vietnam.