"What is the relationship between story, the material world, and consciousness?"

From the perspective of SFL Theory, language construes experience as two domains of first-order meaning:

1. an outer material-relational domain,
2. an inner mental-verbal domain ('consciousness').

Processes of the mental-verbal domain 

1. project second-order meaning (metaphenomena, including stories),
2. range over — or are impinged on by — first-order meaning (phenomena) and second-order meaning (metaphenomena, including stories).