A great way to get students talking to each other is to give them a cartoon storyboard and have them tell the story. Put students in pairs to discuss what they think is happening, one of them writes it down, and finally we compare stories to see which one is closest to real story. It doesn't matter if you can't draw, bad drawings encourage more use of the imagination!
My favourite story is "the choking doberman". It is a very popular urban legend that you can find all over the net. I draw the scenes of the girl finding her dog choking up till the burglar being arrested, with his hand bleeding. It's fun seeing whether the students can guess what happened to the burglar.
You can tell your students to use only present tenses, which are good for storytelling, or in the past as a grammar review. You will find at the end that they will probably need to use difficult grammar like the past perfect, "in the end, the vet realised that the dog had bitten two of the burglar's fingers off"
Look for other urban legends on the net for story ideas.