Amazon's creating AI-generated animated bedtime stories (story arc, images, and accompanying music) with customisable setting, tone, characters, and score. I believe that procedurally generated virtual worlds will be one of the prime use cases for these large models, and this is one example that I expect to see more of!
I think the most difficult part here will be to craft truly compelling and engaging stories, though this is probably soon to be solved. My brother and I attempted a similar project (AI-generated children's books) and the quality overall was not good enough at the time, but at the speed these things move I expect that to be a thing of the past in a matter of months!