GPT-3 won't be able to generate a good CYOA until it can generate a good non-interactive novel. Today, GPT-3 can generate text, so you could try to use it to generate a whole novel. People have, but the novels it generates aren't worth reading.
"CYOAs" are interactive novels. I run a company, Choice of Games, that publishes hand-written interactive novels. Our novels use hidden state to provide an experience that's longer, richer, and deeper than traditional paper-based CYOA books. (The author of TFA links to one of our blog posts in the footer of this article. https://www.choiceofgames.com/2011/07/by-the-numbers-how-to-... )
Our approach is to pay professional authors to write these interactive novels. (And we have professional editors who read and edit their work.)
Could we use GPT-3 to avoid paying professional authors? No, of course not. Writing an interactive novel with interesting, dramatic choices is harder than writing a non-interactive novel, and GPT-3 can't even do that.
The feature that makes AI Dungeon interesting and unique is its ability to improvise in response to player's actions. Presenting a pre-computed menu of options is what hand-written interactive novels already do; to succeed, it would have to compete with hand-written interactive novels on quality.
In other words, when GPT-3 computes an entire novel, it's indistinguishable to the reader from a (bad) hand-written novel. If AI Dungeon were to auto-generate an interactive novel, particularly in the way Gwern describes here, with the choices already pre-computed and crowdsourced in advance, the result would be indistinguishable from a (bad) hand-written interactive novel.
I think it's possible that if some future generation of GPT could generate a good-enough novel, then it could also generate a good-enough interactive novel, but this thing has gotta learn how to crawl before it can learn how to walk.