Did Sai Baba instruct the author to use his own powerful intellect and ego to write the story collection?

No, the text from Chapter 2 makes it very clear that Sai Baba instructed the author to do the exact opposite. Baba explicitly stated, "He should dissolve his ego and surrender it at my feet. To one who acts thus in life, I give full assistance." He further emphasized this point by saying, "When the ego is dissolved, no trace of it remains. Then I myself shall enter with 'I-ness' and write with my own hand." This shows that the book was intended to be a product of divine will and surrender, with the author serving as a humble instrument, not a project driven by personal ego or intellect.