The first sentence is correct:
We hardly ever believed Vinny because what he said was usually fiction.
You probably feel that what refers to the things he said which seems like a plural countable noun phrase.
But we can also think of it as singular, such as the set of all the things he said or the typical thing he said.
How do you feel about They sometimes met in the daytime, but when they usually met it was night?
Or What their meetings seemed like to him was a waste of time?
Those are similar ways of naming groups or collections of things with singular nouns.
Your second example is grammatical, but probably less common or natural in this context.