Yeah I'd agree that I think AI can at least work provided you manage the context properly, multiple top-level files establishing consistent world state, all that jazz. KoboldAI and SillyTavern both do a pretty good job of maintaining internal consistency around longform interactive fiction.

OTOH, that means that the underlying story is that much more important. I think a lot of people mistake coherence for novelty. Biggest offender is puzzles - oh god do LLMs absolutely blow dire wolf chunks at coming up with organic and interesting puzzles.