If the style of the parable is applied to the words of the prophets, how much more then should this style be applied to the words of the sages which cannot be understood in any other way? And concerning this, my father, my teacher, blessed be his memory, has long ago called attention to this particular fact in his "Commentary on the Mishnah." -- Rabbeinu Avraham Ben HaRambam in Discourse on the Sayings of the Rabbis
Placing the Discourse in ContextIt is easy to place Rabbeinu Avraham's Discourse in context because, for the most part, he does the work for us. In the quotation above, he tells us explicitly that his approach is based on that of the Rambam in his introduction to the Perek Chelek in his Commentary on the Mishnah. Here the Rambam introduces what was once a controversial idea: the references to the Olam Habah (the world to come) in the Talmud are distinct from the references to the Tchias HaMeisim (the resurrection of the dead). The consequence of a life properly led is the continued eternal existence of a person’s non-physical soul after its separation from the physical body.
Why was the Rambam’s idea controversial? There are two basic reasons. The first is that if the Olam Habah is the ultimate destination for the virtuous soul, then of what value is Tchias HaMeisim? This led some to question his belief in Tchias HaMeisim despite its inclusion in his list of 13 principles of faith. But the more direct reason for controversy is that the Rambam’s interpretation conflicts with the straightforward meaning of the Talmud: Olam Habah and Tchias HaMeisim are identical and the reward for a good life is revival from the dead and eternal life on earth after the coming of the Mashiach. 
In order to explain this, the Rambam launches into what at first glance appears to be a tangent. He classifies people into three categories based on their approaches to the words of Chazal.
- Those who take all statements of Chazal at face values no matter how fantastic. If the Gentiles understood the beliefs of these people, they would judge the Jewish people to be a foolish nation.
- Those who take the statements of Chazal at face value and deride and mock Chazal for their apparent foolishness.
- Those who understand that the statements of Chazal have both a plain meaning and a secret meaning. When they spoke of impossible events they were actually conveying ideas by way of riddle and parable.
The explanation of the Rambam here is the basis for Rabbeinu Avraham’s approach in the Discourse. The Rambam places a very high value on avoiding any interpretation of the words of Chazal which conflict with our basic understanding of the world.  This places in context of most of Rabbeinu Avraham’s statements about the Derashot and stories of Chazal.
Rambam on the Science and Medicine of ChazalIn fact, Rabbeinu Avraham indicates that his approach to the science of the Talmud is rooted in the Rambam's Guide for the Perplexed.  In the Guide, the Rambam explains that the heavenly spheres are silent. In stating this, he sides with Aristotle over Chazal who maintain that the spheres produce sounds.
Clearly then, the Rambam does not treat the science of Chazal as received truth. More generally, he states that "speculative matters every one treats according to the results of his own study, and every one accepts that which appears to him established by proof."  Elsewhere in the Guide, the Rambam confirms explicitly that Chazal's statements "were not based on the authority of the Prophets, but on the knowledge which they either themselves possessed or derived from contemporary men of science." 
The Rambam is perhaps even more expansive in his Letter on Astrology. Here, the Rambam deals with the following issue: if claims of astrology are completely false, why do we find statements of Chazal that seem to support astrology? He answers that it not proper to abandon reason in favor of a sage's mistaken statement. In addition, it possible that the sage intended the statement as a parable or had some ulterior motive. The bottom line is that "[a] man should never cast his reason behind him, for the eyes are set in front, not in back." 
What about the many accurate scientific dicta of Chazal? Unsurprisingly, both Rabbeinu Avraham  and the Rambam  both emphasize that credit be given when Chazal's opinions are upheld by investigation.
The following table summarizes the parallel passages on this topic that can be found in the writings of the Rambam and Rabbeinu Avraham:
|Know that it is your duty to understand that whoever propounds a certain theory or idea and expects that theory or idea to be accepted merely out of respect for the author without proving its truth and reasonableness pursues a wrong method prohibited by both the Torah and human intelligence.||For speculative matters every one treats according to the results of his own study, and every one accepts that which appears to him established by proof./Similarly it is not proper to abandon matters of reason that have already been verified by proofs, shake loose of them, and depend on the words of a single one of the sages from whom possibly the matter was hidden.|
|Although it is true that in so far as knowledge of our Torah is concerned, we must Believe the sages arrived at the highest stage of knowledge, as it is said (Deu. 17, 11.) In accordance with the instructions which they may instruct thee, etc., still it is not necessarily so concerning any other branch of knowledge.||Their statements were not based on the authority of the Prophets, but on the knowledge which they either themselves possessed or derived from contemporary men of science.|
[W]hat the sages - blessed be their memories ! said, "When thou art hungry, eat ; if thou art thirsty, drink ; if thy dish is ripe, pour it out while it is hot," is undoubtedly true, because that theory is the main key to human health ; it has been proved by many physicians as well as by physical tests, that a man should not eat untill he is hungry, nor should he drink untill he is thirsty ; and when he feels the need of relieving himself, he ought not to delay such action.
But I will not on that account denounce what they say correctly in accordance with real fact, as untrue or accidentally true. On the contrary, whenever the words of a person can be interpreted in such a manner that they agree with fully established facts, it is the duty of every educated and honest man to do so.
Comments are both welcome and encouraged. I'll make every effort to address any questions or arguments posted in the comments.
MISHNAH. ALL ISRAEL HAVE A PORTION IN THE WORLD TO COME, [...] BUT THE FOLLOWING HAVE NO PORTION THEREIN: HE WHO MAINTAINS THAT RESURRECTION IS NOT A BIBLICAL DOCTRINE [...]
GEMARA. And why such [severity]? — A Tanna taught: Since he denied the resurrection of the dead, therefore he shall not share in that resurrection, for in all the measures [of punishment or reward] taken by the Holy One, blessed be He, the Divine act befits the [human] deed.Here the Gemara explains that reason that one who denies that the resurrection of the dead is a principle of the Torah has no portion in the world to come. The reason is as follows: since he denies the resurrection, he will not partake in it (Middah K’neged Middah). This implies that the resurrection and the world to come are identical. For an example of an authority who opposed the Rambam based on the plain meaning of the Talmud, see Rav Meir ben Todros HaLevi Abulafia’s Yad Ramah.
 “In matters such as these [medical, scientific, and astronomical], on should not evaluate statements based on their authors greatness in wisdom, but from the proofs that they supply. My father wrote similarly in the Guide to the Perplexed.”
 "It is one of the ancient beliefs, both among the philosophers and other people, that the motions of the spheres produced mighty and fearful sounds. [...] This belief is also widespread in our nation. Thus our Sages describe the greatness of the sound produced by the sun in the daily circuit in its orbit. [...] Aristotle, however, rejects this, and holds that they produce no sounds. [...] You must not find it strange that Aristotle differs here from the opinion of our Sages. The theory of the music of the spheres is connected with the theory of the motion of the stars in a fixed sphere, and our Sages have, in this astronomical question, abandoned their own theory in favour of the theory of others. Thus, it is distinctly stated, "The wise men of other nations have defeated the wise men of Israel." It is quite right that our Sages have abandoned their own theory: for speculative matters every one treats according to the results of his own study, and every one accepts that which appears to him established by proof." (Guide 2:8).
 “You must, however, not expect that everything our Sages say respecting astronomical matters should agree with observation, for mathematics were not fully developed in those days: and their statements were not based on the authority of the Prophets, but on the knowledge which they either themselves possessed or derived from contemporary men of science.” (Guide 3:14)