Would Augustine consider fictional storytelling to be a form of lying?
St. Augustine wrote a book, On Lying, that delved deeply into the ethical and semantic areas that surround falsehoods. A specific definition of "lie" is often attributed to him:
"A Lie is when a person willingly utters a falsehood for the purpose of deceit."
While this is a nice, short definition, it is nowhere near the sum total of what Augustine wrote on the matter. For example, the quote is taken out of context; with context, it becomes more clear that Augustine was debating what else constitutes a lie aside from deliberate falsehoods:
...whether, again, it be a lie when a person willingly utters even a truth for the purpose of deceiving; this may be doubted. But none doubts that it is a lie when a person willingly utters a falsehood for the purpose of deceiving: wherefore a false utterance put forth with will to deceive is manifestly a lie. But whether this alone be a lie, is another question.
(Augustine, On Lying, newadvent.org)
There is far more in the book than can be covered here. However, in response to the specific question -- would Augustine consider fiction a form of lying -- the answer should be fairly simple. Augustine would consider the purpose of the deed to be more important than the actual deed; notice above how he says a truth could be classified as a lie if uttered in deceit. Fiction, being intended for entertainment, should not fall under this definition; deceit never enters into it, even in the cases of "this story is true," where common opinion always assumes that details have been changed. A storyteller is usually not trying to convince the audience that the story is factually accurate, nor is he trying to wilfully deceive them. Instead, the story is intended to be a fictional account of something that did not happen; characters, places, and events are all created for the purpose of entertainment. If a storyteller was writing fiction with the intentional purpose of tricking readers into thinking the story is true, that would be a lie under Augustine's definition. However, while normal fiction may be a literal lie -- that is, a document of events that is untrue -- it is not a malicious lie, and so does not fall under Augustine's definitions.