If not all of the Old Testament's characters were literal historical figures, then wouldn't people like Jesus and Paul be in error to refer to people such as Abraham, David, and Jonah, even mentioning biographical details, in a way that doesn't seem figurative?
Let me give you two examples to sharpen the question even further, then propose another interpretation of some New Testament passages that mention these people.
1. Jude repeatedly draws on material that is finally rejected from the canon of Scripture: 1 Enoch in 14-15, and the Assumption of Moses in 9. To quote from Raymond E. Brown's Introduction to the New Testament, "the writer accepts and feels free to cite a wide collection of Israelite and Christian traditions, and is not confined to a collection of written books ever deemed canonical by any group that we know." Most strikingly, he quotes from 1 Enoch as if its words were direct quotes from Enoch. Now, this section of 1 Enoch dates from about 170 B.C., and is an apocalyptic work, using the conventions of apocalyptic literature. Of course, Enoch's character in Genesis is just a passing figure in Gen. 5, only mentioned as the father of Methuselah. But the following comment, "he walked with God and he was not; for Good took him" (Gen. 5:24) gave rise to all sorts of legends about him, for instance that he never died but ascended into heaven. Literature that claims to come from "Enoch" and repeat his prophecies keeps being written until at least the 3rd century AD.
Could Enoch have said all that Jude says he said? Of course. For all we know, Enoch wrote the Pledge of Allegiance. But no reasonable historian thinks of anything in 1 Enoch as truly the words of Methuselah's father. They are legendary, and this does not trouble the writer of Jude in the least, for he repeats them alongside other legends that were current in his day, whether or not they were "scripture" in the later sense.
2. But Jude is just an oddity on the fringes of the New Testament. Let's move to the center. Jesus quotes David as the literal author of Ps. 110 (Matt. 22:43). Peter does the same in Acts 2. And these are extremely important texts to proving Jesus' divinity!
Now the ascription of Ps. 110's authorship to David, which is contained entirely in the psalm title, comes later than the psalm itself, as do all the psalm titles. The titles were probably added as the psalms were collected and used in worship at the Jerusalem Temple. (How much later? There's no way to tell, except that they are certainly older than the 2nd-3rd centuries, when the OT was being translated into Greek and the translaters no longer understood quite how to translate their technical terms.) Thus it is a later tradition that ties Ps. 110 somehow to David, along with 72 other psalms. By the New Testament era, this is understood as authorship. It's not entirely clear from the Hebrew that authorship is what "a psalm of David" originally meant, but it certainly is what is meant by "a psalm of Asaph" and most of the other ascriptions in the psalter.
By the time the Hebrew text is canonized by Israel, these titles are considered inspired and authoritative; but it is important to realize that they didn't start out that way, that they aren't contemporary with the texts, and that they probably date from an era when people would be associating psalms with the now-legendary David, rather as we now collect and pass along (and sometimes make up) the sayings of Yogi Berra. There would be no way of confirming that David really wrote all the stuff that comes to be related to him. Indeed, it's hard to believe, given some of the language (Ps. 139's northern dialect is ill-fitting since David is southern) and historical allusion (Ps. 5:7 refers to the temple, which didn't yet exist).
Of course, there's no way to be sure that David did or didn't write any particular psalm. His worship of God certainly made an impression on later Israel (2 Sam. 6), and he might well have contributed at least of some of them, at least in earlier forms. But to appeal that some of the psalm titles may not be historically accurate is to give up the argument, because they are canonical in both the Hebrew and Greek Scriptures by Jesus' day.
Jesus and Peter take as decisive the idea that David, inspired by the Spirit, did write the exact lines of Ps. 110. They have taken the psalm titles as authoritative. Because this is used as such a strong argument in Matthew and Acts, this must be true of Jews in general in the first century (otherwise the response in 22:46 would not be silence!). So here Jesus and Peter are simply typical first-century Jews, believing what all Jews believed about the psalter. Jesus is quoting and interpreting Ps. 110 in a normal first-century way.
What I'm claiming, regardless of the actual authorship of Ps. 110 or 139 or 5, is that the way Jesus quotes Ps. 110 still doesn't depend on David actually having written it! All that matters is that God's Word attributes Ps. 110 to David in a way that makes it clear that David has a lord who is someone different from the Lord. That is enough to reduce Matthew's authorities to silence and Acts' crowds to repentance. God says it, they believe it, and that settles it.
Why can't we get away with this today? Well, we do, all the time. Think about how I might make a sermon illustration: "As Harry Callahan said to a criminal as he trained his gun on him, 'Go ahead ... make my day.'" I might even describe Callahan as a middle-aged, frustrated Californian who grimaces whenever he sees injustice being done. I don't need to tell anyone that (Dirty) Harry is actually a fictional character, because you all know that. But in fifty years, people reading my sermon might not get the allusion unless they were historians or old-movie buffs. Would that have meant that my sermon was false or inaccurate, or that I was misleading my congregation, or even mistaken myself? No. Are they misled? Not really, because they didn't belong to the world I shared with my original audience.
Yes, but Dirty Harry really is fictional, you say. Jesus and Peter would have been ridiculed for appealing to a fictional character in Matt. 22 and Acts 2! How can Dirty Harry compare to Moses or David, who no reasonable historian believes is fictional? Well then, let me ask you to imagine that I'm quoting Oliver Stone's JFK instead. And I say, "As JFK said, '....'" (I haven't seen the movie, so I can't quote any actual lines.) I might mention the dates of JFK's birth and death. Now you might be a historian of JFK, and you might know how much Oliver Stone likes to put words in the mouths of his characters in his docudramas, and so you might tell me politely after the sermon that those weren't JFK's real words. No matter, I'd probably reply; the line still makes my point. Both the movie character and the real guy are named John F. Kennedy. I haven't made it clear which one I'm quoting.
In both my fictional and docudrama examples, someone who hadn't seen these movies (or who thought they were nonfictional in the modern sense) would agree that "the genre of this literature ... in no ways seems figurative." That's right but I'm not being figurative either when I quote Dirty Harry or Oliver Stone's JFK. I'm quoting a literal character in a story. Dirty Harry and JFK aren't allegorical symbols for something else, but speakers of lines that illustrate the point I'm making.
Now this may sound a little weird, but I want you to imagine for an instant that Jesus and Paul and the writers of both testaments are doing the same thing. When they quote David and Moses, they aren't quoting a flesh-and-blood man with whom they've had a personal conversation. They're quoting a character in a text. They may or may not believe that the real David and Moses said everything attributed to them in the Old Testament. (My hunch is that they believe David and Moses did say all attributed to them. They are in no position to think otherwise, because there are no 'actual' words preserved anywhere else than in the scriptures that they're quoting. How are they supposed to know without German source critics to 'help' them?)
But then how can we say Peter (or Luke reporting on Peter) is inspired, if David didn't say everything Peter says he said? Well, let me phrase the question more helpfully: "How does biblical inspiration work if it allows Peter to claim that David said things he probably didn't really say, or Jude to claim that Enoch said things he almost certainly didn't say?" Or, in the language of your question: Rather than assuming that the New Testament is illegitimate if it takes over Old Testament material on Abraham, David, and Jonah (historical people in my opinion, by the way) that falls short of modern standards of historical accuracy, we should ask how the New Testament as God's Word is using the Old Testament as God's Word, and let the actual evidence shape our understanding of inspiration, rather than letting our preconceptions about inspiration drive the way we 'allow' the New Testament to use the Old Testament.
But Peter is just a human being. What about Jesus? Surely he knew whether David really wrote the psalm? Well, I'm not happy letting Peter or Luke off the hook this way, since we're now distinguishing between inspired scripture and scripture spoken by Jesus, as if there are two classes of inspiration. I don't think that's a tenable distinction for Christians to make (though some Christians do make them). The more interesting side of this question concerns what Jesus knows in his humanity. Does he know whether David really wrote the psalm? It's an open question whether he does (or did). It is not heretical, and not incompatible with an affirmation of Jesus' full divinity, to deny that Jesus knew whether Moses really said that stuff. The question goes to how in the flesh the Son would have learned, and understood, and "grown in wisdom" (Luke 2:52).
Does Rom. 5's validity depend on Adam not being a figurative character? No and yes. Paul's argument works whether or not "Adam" refers to a real, flesh-and-blood human being (though who Adam's historical referent is may affect the way we understand sin to be transmitted, especially if we want to follow Augustine's reading of Rom. 5:12). What seems to me to be necessary is the affirmation that sin begins in some concrete way after the beginning of human history, and that the concrete death of Jesus reverses its effects.
Abraham is indeed a literal figure in many of the New Testament texts that mention him. I have a hard time believing he's entirely fictional. But then Jesus himself says that God can make children of Abraham out of stones. So he's as much a symbolic as a literal figure.
Can the Christian faith still work if these are entirely fictional characters? You have to decide on a case-by-case basis. I think the Old Testament is really unimaginable if Moses or David is entirely fictional. Besides, his literature is usually "history-like" rather than "mythological," to use a distinction common to biblical critics, so it presupposes some strong historical basis. Fabricating Moses would be as tall an order as fabricating George Washington! I think I would be guilty of misreading Scripture, and would perhaps place the integrity of our Christian witness in jeopardy, to deny that Moses or David was real. At the very least, I would be radically revising the traditional Christian theology of history.
We also know that Israel has a strong sense of the redemptive nature of history, and so Israel becomes very, very careful to remember faithfully the historical events through which God delivered them from slavery. It also becomes very, very careful with the exact words of its scriptures. These are not people who played fast and loose with the facts! Likewise, Christians died for affirming nothing more than that a real event Jesus' death and resurrection had really happened. It wasn't a legend or a mere story they were repeating, but a past event they knew had changed the fundamental course of universal history. The most sacred traditions Paul repeats to his congregations concern real events passed down to him, sometimes from the apostles themselves (1 Cor. 15:3-7, Phil. 2:5-11, 1 Tim. 3:16). Jesus' blood is real, his risen body is real, and that's why our salvation is real. And all these things are strong reasons to trust Scripture not only as the Word of God, but also (!) as a historically trustworthy document, as long as the nature of its premodern historiography is kept in mind.
Nevertheless, just because George Washington is a real figure in the past doesn't mean that unhistorical legends can't grow up around his life such as the story of his chopping down the cherry tree and admitting to it. That story even contains a direct quote: "I cannot tell a lie." As far as I know there's no historical basis for believing it actually happened. Nevertheless, it is a concise illustration of the moral character of America's first president, and is essentially true regardless of its historical status. You aren't lying if you repeat that story, or if you use it to describe the real George Washington. Nor would Scripture fail to be inspired or legitimate if it used this episode say, in exhorting children to tell the truth. I'm using this illustration to claim that while Moses or David must be a real figure from Israel's past, not every story about them has to be literally true in order for Scripture to be infallibly true and God-breathed. Like the John F. Kennedy of Oliver Stone's JFK, Moses and David are characters as well as flesh-and-blood human beings. They are larger than life.
What about Jonah? Well, there are lots of indicators in the text that Jonah is more of a fable than a historical narrative. My personal favorite among these indicators isn't the big fish, but the plant that grows and dies to bring insult to his injury (chapter 4). Jonah is also a marginal figure in Israel's history. The fact that Jesus uses his story as a symbol of his resurrection and how Jews and Gentiles will respond to it (Matt. 12:38-41) serves his rhetorical purpose whether or not a real Jonah really went to Ninevah, or whether a real Ninevah will rise to condemn unbelievers in Jesus' day. The point is not to affirm the literal historicity of his words, but to heed their warning.