When is it not okay to be honest?

People say that honesty is the best policy, but how come peoples feelings get hurt when you are being honest and even when you're not?
I have mixed feelings about honesty... telling someone that their hair looks horrible (even when you didn't ask for their opinion) is crossing the line i think. But that's the thing.. many people say they like to be told these things if they are out and about. I personally don't. I got told last night by my sisters boyfriend that my hair looks horrible natural and that i should straighten it all the time. Well i'm sorry but i dont have the time to constantly damage my hair. He also said something about my clothes. I have these really nice brown trousers but i was wearing a baggy boys t-shirt with it (one of my boyfriends which i wear it when i miss him) and he said my clothes do nothing for me and that i looked terrible. Fair enough everyone has their own opinion but to be truly honest... i would of liked him to keep it to himself.
In other cases honesty is the best policy, especially when you are in a relationship. The worst thing you can do is hide things from your partner because sooner or later they will find out and then be hurt that you never told them.
Is honesty really the best policy though? It hurts peoples feelings at times and without honesty... you still get hurt.
Tell me what you think about honesty?