The Spanish government's reluctance to pay for Columbus' expeditions didn't have anything to do with their misconceptions about the shape of the world. Ironically, it was because Columbus himself severely underestimated the size of the Earth and everybody knew it. The distance he planned to travel wouldn't have taken him anywhere near Asia. Nevertheless, he eventually scraped together enough funds to embark on his ridiculous adventure, and the clusterfuck that was the Columbus voyage has been celebrated annually in the Americas and in Spain ever since.
So where did the myth come from? It began with author and historical charlatan Washington Irving, who wrote a novel about Columbus in 1838. The novel was fiction, but some elements managed to creep into our history textbooks anyway, probably by some editors who wanted to spice it up a bit. Who's going to read a history book that's just filled with a bunch of boring s**t anyway?