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Fox News are the masters of Narrative. Fiction writes can write a good story and it doesnt have to be real but sound like it is real and possible. If fiction writers can write a masterpiece then Fox News has found a way to make their fiction into a reality that is accepted by the masses. It doesnt matter how many times you yell Fox News is lying, if they are good story tellers, people are going to watch and listen to their voices and believe their stories as if they are real. Not because they are, but because their stories are powerful and resonates to their "Inner Fantasy That they Confuse as Reality".
You cannot defeat Fox News by creating a leftwing/progressive version of Fox (you cant MSNBC, deal with it) it only emboldens and validates their message and their way of doing business.
Stewart's point is that actual news organizations (which his show is not and shouldn't have to be) should be completely nonpartisan and more investigative and "journalistic".