What is the ruling on talking to oneself and imagining stories, and is it unlawful for one to imagine oneself as a hero in a story?

What you mentioned about daydreaming, if it is merely a whisper (waswasa) not accompanied by speech or action, then there is no sin in it. However, if you speak what is on your mind, scholars have differed as to whether the angel records everything spoken, or only that which entails reward or punishment. You should strive to rid yourself of daydreaming by engaging in beneficial knowledge and righteous deeds.