Anyhow, WRT the OP: Ideally, I think one should be honest but careful with delivery. I usually try to validate the other person in one way or another whenever I point out negatives... Even if the person I'm confronting is in the wrong, I won't say "you're wrong." It'll be something more like, "Circumstance A and circumstance B seem to have affected your judgment/led you to do C... I can understand that. I think maybe you could do this to remedy the situation... Here's another option... In the end, though, it's always up to you to decide." IME I find that going on about negative consequences rarely work.
I don't really see the whole thing as sugar-coating though - more like a strategy. It's a strategy to make the other person more willing to listen (and therefore get your message across), and consider what you're saying without feeling hurt or misunderstood.
Oh, and--I have serious issues with people with the victim mentality too. I only have a few friends who are like that (thank goodness), and whenever they start going on about how oh-so-pitiful they are, I just bail. Drop the conversation as politely as possible.
I strongly recommend channeling your positive energies to people who're worth it.