IMO there is a huge difference between being honest and being disrespectful.
If someone asks me for my opinion, i won´t sugarcoat.
And in that incident i also would have answered with "the food was barely edible" which is the truth and gives room for future improvement.
On the other hand though, this doesn´t have to be insulting - why would the waiter be insulted when the food was shit? After all, he didn´t cook it, and it is also true. Just because one is stating some truth doesn´t mean it is necessary to say it in a rude manner, e.g. shouting/getting mad at the waiter.

Also, like a comment further down is saying - why would you plainly tell someone they are fat and ugly?
Fat - one thing. Maybe there is a benefit in hearing that, if that person is asking you and is actually morbidly obese and it might get that person to lose weight (But usually - if you are that obese, you know it already).
But ugly? And who is the judge of that, and why does it even matter? That is, imo, just insulting and disrespectful and says so much more about you than about the "ugly" person.
And while i highly believe in being absolutely honest all the time (and agree with @firepower that it will lead to longterm trust and stable relationships) it is more often harder for the person speaking some uncomfortable truth than for the receiver.
Also, to be honest first and foremost you need to be able to be honest with yourself. This is probably something most people struggle with the most.