I don't know about castle sets but the boxes of my larger pirate sets all have stories that explain the history of the particular set.
LEGOLAND castle sets had brief descriptions in the catalogs but not on boxes. Boxes usually said something about making alternate sets, using your own creativity, etc.
As a child, you knew some storylines by just seeing the catalog pictures. Forestmen invading in large quantities, etc. I dislike the heavily tailored storyline but kids seem to like it. Lego just recently announced that there will be Knight's Kingdom books in spring 05. This isnt such a bad idea in my opinion since reading is good.
As an administrative note: This topic should not be used for 80's storyline speculation. Those types of posts belong in the stories forum.