What is Hawthorne’s position on the nature of people’s honesty with themselves?

Perhaps Hawthorne's most impassioned address to his reader comes near the end of the novel, after Dimmesdale has revealed his sin:

Be true! Be true! Be true! Show freely to the world, if not your worst, yet some trait whereby the worst may be inferred!

The novel itself is a meditation not so much on sin as on guilt, and the guilt derives from not being honest. As dark as Hester's life in Salem is, she seems less inwardly damaged, in large part because she was never allowed to hide the sin of her adultery. Pearl is that living sign. While societal scorn and ostracism force Hester to become somewhat radical in her thinking, she herself is not nearly as self-tormented as Dimmesdale.
Dimmesdale's desire to live a double life (outwardly the ideal spiritual guide, while inwardly a desperate penitent) destroys him in every way possible. His guilt, stemming from this knowledge of hypocrisy, destroys his peace of mind, his physical health, and his spiritual confidence.
Pearl, on the other hand, becomes the most remarkable of characters. She is, not coincidentally, the character who lives closest to nature, with no impulse to hide her true self from anyone, least of all herself. She is also the character who asks questions prompting others to admit their truths, most notably Dimmesdale, who she rejects because he is unwilling to stand with Hester and Pearl publicly. As such, she leads the least distorted or compromised of lives in the novel.