This actually began as a comment for a post, Taking Jesus Literally, on the Spiritual Reflections blog. (The title of this message should be a link to the post, but in case it doesn't come through FeedBurner properly, it's http://revmdavis.blogspot.com/2010/03/taking-jesus-literally.html)
Unlike previous posts here, this is purely my own opinion. Part of me doesn't like that, because my opinion is worth as much, or as less, as anybody else's. On the other hand, what's the title of my blog? Consider This! I'm not going to say this is "right" or that you're going to Hell if you disagree with me. (I do insist that, if you choose to disagree in a comment, to do so agreeably. No personal attacks, no foul language, etc. And, sorry, I have the final say on how that gets defined. Cope.)
I've found that taking the Bible "literally" is the only way to go. The problem is in how you implement that. Obviously, from the term "implement," I'm an engineer by trade and by Godly design (it comes naturally to me, in other words), so that affects my perception of things.
So let's look at taking the Bible "literally." First, there are obvious places in the Bible that are symbolic or poetic. The Song of Solomon, also called the Song of Songs in some translations, is essentially a love poem. The Psalms are songs, not commandments. When you start to get into prophecy, though, the distinction becomes dull, especially when you get into end-times prophecies.
Related to the symbolic and poetic are allegory and idiomatic phrases. For example, when Psalm 50:10 says that the "cattle on a thousand hills" belong to the Lord, you're not going to find hill #1,001 and say that the cattle on that hill doesn't belong to Him. (Actually, you might want to pop the link to that verse open in a separate tab, because he's going to get a lot of mileage in this missive.) Idioms in the Bible are harder to find because the idioms don't translate literally well at all. The often-despised Living Bible translation (which served as the basis for the slightly less paraphrase-like New Living Translation) actually translates one idiomatic phrase as "don't count your chickens before they hatch" (specifically 1 Kings 20:11 ... I'll let you read it in other translations, via the link to Bible Gateway, to see the "better" translation).
The second enemy of literal Bible consideration is precision. We 21st century "civilized" "educated" fellows want finely detailed numbers. If someone counts 77,000 in one place, then they'd better not claim 77,500 somewhere else, or even 77,005. The problem is, when counting that many soldiers, for example, that are milling about, ready for the battle (and probably vulnerable to attack while standing there), performing a precise to-the-person head count is simply not reasonable. Even then there were methods for estimating a rough count of people; estimation is still used today. For other metrics, there's the law of "significant digits" (which should send some students that were forced to take physics in high school into a shudder). Significant digits basically says that you have to take the precision of measurements into account, and the result can only be that precise, no matter what a calculator says.
A third issue when dealing with literal interpretation of the Bible is audience. Now, I'm not a dispensationalist, even though I happen to agree with many views that are often labeled "dispensationalist." Dealing with the parts I cannot agree with will take this post too far off-base. I will say, though, that there are commands that were given to the Israelites that don't apply to the Gentiles (Acts dealt with an early form of this), there are commands given to certain individuals that aren't necessarily for everybody, and there are issues that aren't an issue for one group that are for another (such as the "eating meat offered to idols" discussed in 1 Corinthians).
In order to know the audience, usually you need another important factor for interpretation: context. Again this can take a post of its own, but there are very few verses of the Bible that we can take by themselves and get a clear picture. Psalm 50:10 provides a good example of this as well. Reading even the rest of the verse makes it clear that you don't have to count hills to determine where cattle that aren't God's exist; it starts out with saying that all critters are His. The remainder of Psalm 50 should give you an even greater idea of what's going on. Many, many false teachings have been generated by taking a verse or two out of context and using it to "prove" some flake-generated idea.
There's one vital component, though, of literal Bible interpretation that too many people miss: the Holy Spirit! Although some people will take this as heresy, it's true: the Bible is merely words on paper without the indwelling Spirit of God as a part of your life. No, I'm not saying you need to speak in tongues or fall backwards when touched on the head. I'm simply talking about the Holy Author of the Holy Bible dwelling within you! If you have not turned over your life to Jesus Christ, don't even bother with Biblical interpretation at all. It won't make sense!