Does Sai Baba play an active role in the telling of his own stories? What does the text say about the narrator and the audience?

Yes, Chapter 36 makes it clear that Sai Baba is not a passive subject but an active participant in the narration of his life. The text states that he "loves his own stories very much" and that he uses the speaker and the listener as a "mere pretext" to fulfill the desires of his devotees. Furthermore, it suggests that the ego or "I-ness" of the speaker is set aside, as the "playful Sai himself takes over and makes his own qualities heard by his devotees through someone." This implies that the stories are a divine play orchestrated by Baba himself for the spiritual benefit of all involved.