How does urban ethnography challenge assumptions about urban life and urban myths ?

Great question!
Urban ethnography challenges assumptions about urban life and urban myths through its very nature, and through its practices.
Ethnography applies direct, intense observation to cultural practices. Urban ethnography applies the techniques and methods of anthropology, which were traditionally applied to distant peoples (usually those considered primitive), to contemporary, urban populations. It can be applied here at home, rather than having to be practiced far away.
One of the goals of ethnography is to describe culture, and to do so with as much objectivity as possible. In that statement you see two distinct goals that would transform how people see urban life. The first is that it treats urban practices as a culture. When this happens, some urban activity (like, say, the use of gang tags) changes. It is no longer just vandalism, something criminal or senseless to be dismissed. It is a social practice with cultural meaning for those involved. The second is the objective, even scientific, approach involved. It is relatively easy to be objective about something distant from you. You aren't directly involved in the rings of Saturn, for example. However, it is much harder to be objective if you are actively involved in something, like a family or relationship. That's the case in many urban settings. People are part of what they are trying to understand, and so urban ethnography offers new possibilities for objectivity.
 
 
http://sites.utexas.edu/ethnolab/