Throwing some random suggestions for characters/details/etc. out there, feel free to ignore anything that doesn't meet the theme. I am assuming generic fantasy as genre since that's the most common, let me know if that's not the case and I'll alter my suggestions.
-Character: Goblin merchant who likes to scam people by selling fake relics & magic items and such. Actually a very clever artisan, but using his talents illegally to make his family proud.
-Location: Creepy cave with a bunch of stone statues of frightened warriors. No actual danger here, just an eccentric sculptor.
-Item: Enchanted high-quality well-balanced valuable steel blade enchanted to look like it's extremely poorly made.
-Character: Major villain. Friendly tavern barkeep who advises the protagonists.
-Character/Location: Sentient tree/forest. Plotting total world domation on a 10,000-year timeline.
I'll probably think of more later.
Mormons always make things worse.
Location: Mount Neverhunger.
Going off of lux's chaotic magic concept, this mountain was once just a normal mountain. One fateful day though, a wizard used what he thought was a simple spell to make some food. Instead of the results he wanted, he made everything, including himself, into living food.(think cloudy with a chance of meatballs 2) The wizard still lives on the mountain somewhere, and all of the food plants and animals do his bidding. If he ever wanted to leave, he would have a large edible army behind him.
How about throwing some puppets in the mix? I'm thinking marionettes.
Will the exterior of the castle also be covered in shag carpet?
You don't need a computer program to help you with the story. But you can use random tables. When Philip K. Dick wrote his alternate history novel, The Man in the High Castle, he had characters sometimes make important life decisions based on how the sticks fell when using the I-Ching. He actually would use the I-Ching himself to decide where to take novel's story from there. The novel is now considered a Science Fiction Classic. There are plenty of RPG sites that have random tables you can print up for free!
Here's an example. How To Generate Ideas With Playing Cards - Springhole.net
I think the point of using Novel AI was to not have to do the actual writing, which you would still have to do if you used one of those story generation methods