This may become a homework assignment for me, and possibly a bigger theme for my later work, but I thought I would get down some quick, initial thoughts here. In the Mahabharata, the classic Indian epic of Hindu mythology, there is a story, "Nala and Damayanti" in the middle of the main story. My guess is that in the longer versions of the epic, there may be more than one instance of this, but this particular tale illustrates a steady course of action for the main characters to follow.
The tale within a tale is a popular literary device, and one around which such series as the 1001 Arabian Nights are wholly based. We have seen that the same is true in cinema - the flashback being an obvious example.
I think we can consider mythology, and really, any story, in the same vein. We have our reality - which can be considered an ongoing tale - in which we imagine, tell and sometimes write stories. These stories are tales within our own tales. We use them to illustrate possible courses of action for ourselves to follow. Religious mythology, the tales of our extant religious systems, are perfect examples of stories meant to illustrate life. Often they relate the same advice of myths from past religious systems, such as the Norse myths, but few now follow the Norse as religion. There is little difference to the advice in the tales, though.
If we could get past belief and see myth as story, we might be a lot better off in our own living myths.