[schoen]

I wonder where research on generating intelligible stories by computer is.

I think Roger Schank had some research on "scripts" in the 1980s, involving models of people's interactions and motivations. That might not have been very useful for AI in general, but maybe it's useful if you wanted to literally generate scripts for people to act out.

I'm sure you could make computer models of stories by combining models of scripts, tropes, and agents. I mean, a simple case would be something like The Sims, where the simulated agents act out simple stories autonomously and in response to prompts. You could probably make movies based on Sims stories already, although it's better at generating situations than dialogue!