I think your approach of incorporating creative writing into the class is great. Give them plenty to do and let them know their final mark will be based on participation and effort rather than accuracy or an exam at the end. Can you compare films and books? Also use plenty of short stories and folktales/mythology.
Some very quick and dirty activity ideas:
Ask the students for a celebrity. Then a place, a number, a colour, a sound, an animal, some kind of vehicle, a *creative* adjective, a *creative* verb, and a *creative* adverb. Write all of these on the board. Then put the students in groups of 4 or 5 and have them write a short story including all of the elements. The *creative* words can be used to emphasize new vocabulary or just to give students a chance to show off. After about 3-4 minutes of student writing you should say, "Oh, I forgot... you also need to include ________ in the story!" Now they all groan and start over. This is good for about 15 minutes of writing with presentations after.
Give the students the first sentence of a story. They write the next sentence and then pass it to the next student. Rinse and repeat. Good for about 10-15 minutes. You can have students each edit a story for homework.
This one takes a little organization. You need groups of exactly 4 (students A, B, C, D). Give them all some story prompts like: it was the worst day ever, I never thought I could do it but, I'll never forget my first, etc. and tell them they should make a brief note about each prompt and that they are going to tell these stories. For now the students work in pairs, A-B and C-D. They swap cards and choose the story they want to hear. Each student has 5 minutes to tell their story while the other student takes notes.
Now comes the tricky part: tell the students that they "own" the story they just heard and they have to write it and make it better! They need to have a protagonist, an antagonist, and a goal. They must use the first person (it's their story now), and they have 10 minutes (teacher's discretion) to write it. After this, the students get a new partner and they swap their written stories: A-C and B-D. They have 5 minutes to read the story and ask the other student questions about it. Now their job is to re-write this new story (again, as their own) and include a strong opening, create a conflict, and write a memorable ending. They have 20 minutes and/or homework time. These stories are great to put up on the walls so students can read what happened to their stories and ask about the inspiration for the others.
Some literary activities I haven't actually tried out:
Ernest Hemmingway considered his best story to be just 6 words long:
For sale: baby shoes. Never worn.
Now it's the students' turn! 6 words!
Finally, I don't know your students' level, but if you want to interest them in literary criticism, there is no more entertaining work on the subject than Fenimore Cooper's Literary Offenses
by Mark Twain. It is bitter, sarcastic, condescending and very sharp... it certainly appealed to me when I was in school! Even if the students don't like it, I hope you do. Good luck!