AI Advancements have augmented casual writing and story generation, but their usage poses challenges in collaborative storytelling. In role-playing games such as Dungeons & Dragons (D&D), composing prompts using generative AI requires a technical understanding to generate ideal results, which is difficult for novices. Thus, emergent narratives organically developed based on player actions and decisions have yet to be fully utilized. This paper envisions the use of generative AI in transforming storytelling into an interactive drama using dynamic and immersive narratives. First, we describe scenarios where narratives are created and character conversations are designed within an overarching fantasy disposition. Then, we recommend design guidelines to help create tools using generative AI in interactive storytelling. Lastly, we raise questions on its potential impact on player immersion and cognitive load. Our contributions may be expanded within the broader interactive storytelling domain, such as speech-conversational AI and persona-driven chatbots.