To inspire someone is to fill that person with an animating, quickening, or exalting influence. A leader’s courage might inspire her followers. The verb hearten means “to give courage of confidence to” or “to cheer.” This verb draws on the notion of the heart as the seat of courage, spirit, or enthusiasm, an idea that is reflected in expressions such as take heart, put your heart into it, and be all heart, as in the case of someone who is admirably undaunted and energetic in an endeavor (she's all heart!).
To feel discouraged is to feel deprived of courage, hope, or confidence as a result of something; a disapproving comment by someone who you were hoping to impress might leave you feeling discouraged. The adjective crestfallen describes a similarly low state, though with an old-fashioned and literary ring. Crestfallen means “dejected” or “dispirited.” This term often occurs in descriptions of appearance, as in a crestfallen look or a crestfallen expression, which makes sense since the term is thought to allude to the drooping crests of defeated animals. (A crest here being either a tuft or other natural growth on the top of the head of an animal, as the comb of a rooster, or, perhaps the ridge of the neck of a horse.)
To exaggerate something, such as the difficulty of a task, is to overstate it or to magnify it beyond the limits of truth. To embellish something, such as a story, is to enhance it with fictitious additions. While both terms deviate from what is accurate or true, embellish implies ornamentation rather than distortion. This sparkling nuance is a carryover from the other sense of embellish, “to beautify by ornamentation.” One may embellish a gown with beads or jewels to make it more beautiful, or embellish a story with colorful details to make it more interesting or compelling.