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Nick is fairly reliable, though he is not completely honest. In boasting of his virtues as he does early in the novel, Nick demonstrates an immaturity that he will lose by the end of the story. To create this naivete in Nick, Fitzgerald offers several glimpses of Nick's hubris, his ambition, and his (small) hypocrisies.
While Nick says that he does not judge others, the language that he uses to describe Tom and Gatsby in this first person narrative clearly suggests that Nick is, in fact, judging people harshly and often.
Nick's admission to the ambition of becoming a cultured and scholarly fellow in a single summer out east is evidence of his own disconnection with reality. While this disconnection is far lesser than that which Gatsby displays, it is only different in degree. Nick judges Gatsby as a man dedicated to a fantasy, yet he is subject to fantasies of his own.
Through these flaws in Nick's character we are drawn more fully into the world of the novel. Nick's opinions are important, in large part, because they change over time. First impressions and harsh judgements give way to more empathetic views. Nick grows up and eventually develops the positive traits that he claimed to begin with.
Despite his habit of lying about himself, Nick does not lie about others. Readers must acknowledge the fact that Nick is offering opinions as a narrator at times, but we do not need to doubt his belief in these opinions. His lies constitute self-delusion but not deception. For this reason, we can argue that he is reliable as a narrator and dynamic as a character.
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