It should be possible to make a story writing AI. People have been writing stories for a LONG time, so Im sure there are enough systems and approaches to writing stories that a computer could write one (if you just collect enough of those in one place). Of course it would be limited to a subset of all possible stories, but people seem to be fine watching tv series that follow the same pattern over and over again...

There is a such thing as computer-generated novels. I guess they end up being pretty strange though. There's also computer-generated news articles for sports and business. The articles pull stats from raw data and then generate an article using a template and segments of human-written text.

Spore wasn't a great game, but the creature generator was impressive. Could another iteration or two on that technology produce reasonable art assets? I don't see why not. I can't find the link now, but there was some research project that would modify 3d models along descriptive dimensions, so if you requested it be "scarier", the model would have sharper teeth and such.

Automated scene descriptions have improved a lot lately. Somebody could run that algorithm across 50,000 movies to have shot-by-shot descriptions of each, and then a model could be learned to connect scenes in plausible ways. You could cross reference imdb, and teach the machine how a horror story tends to proceed versus a romantic comedy. It could learn color palette choices, lighting techniques, genre conventions about pacing and character introduction, etc.

Story-wise, I think the dwarf fortress approach is promising. It's still generating a lot of noise for every interesting story, but you are starting to see narratives unfold naturally. It just simulates exhaustively many, many possible actions for all the residents of the world. People can be adopted, can write heroic poems, can wage war on other nations. Out of that, stories start to rise out. I think the developer is enamored with the simulation doing it's thing, but you could always bend a simulation towards narrative goals. Dwarf fortress simulates the actions of a fantasy realm, but the same sort of exhaustive simulation could be applied to a modern warzone or a highschool.

That's of course heavily manual. If we really want to make the AI stand on its own, learning to generate content that "looks like" existing stories seems reasonable if tricky.

Is the tech there? Not quite, I think a few more advances are needed. It's also going to be hard to wrap all these research threads together. But I think it's closer than we give it credit, and while I think world class content that really gets you thinking and understanding the human condition is further out, something that competes with the genre-hewing mass market content I would guess is within 10-15 years of existing.