Thomas Malory got the legend of King Arthur from Geoffrey of Monmouth - a Welsh monk who lived in the early 12th century. Good 200+ years before Malory.
But Geoffrey of Monmouth's work was largely unknown until Thomas Malory revived it.
Thomas Malory's book Le Morte D'Arthur became a bestseller because of the right timing - Guttenberg invented his printing press at just about that time.
In either case - the Arthurian legend is entirely made up. Geoffrey of Monmouth weaved the story out of his imagination - which was later picked and spruced up by Thomas Malory.
About the King - I may have to check up on it - may have made a mistake.
Update: did some checking. Thomas Malory: 1405 - 1471. King Henry VII: 1457 to 1509.
King Henry VII was so influenced by Thomas Malory's work that he also named his first son Arthur (but who didn't live long enough to become the next King...)
Heroes creating history vs history creating heroes is debatable. But this is awesome reading: http://www.invisibleheroes.com/hero.asp?issue=116