I have used the tool Voicethread as a great way for groups to create a quick short story and comment on others. The site is geared towards letting people comment on other's stories using a webcam, microphone, text comment, drawing, or even old-fashioned telephone. You can set up closed groups so only your class has access

This is a blog entry on a variety of websites to use for storytelling.

This a very comprehensive site with many links to copyright and fair use information.

This website has several links specifically for use with educators and students. There is a good PDF poster to display in the classroom as well somewhere on the site = I am trying to find the exact URL for the poster.