[MMM]

How's this to make it more confusing?

Once something becomes the topic of conversation, or is obvioulsly the topinc of conversation, then it can change to "kore".

For example, you could be at a movie with a friend, and the main girl suddenly dumps her boyfriend because he likes to eat chips in bed.

"Sore wa shinai deshyou" (Who would do THAT?) might be a response.

However halfway through the movie you could say

"Kore wa ii hanashi da ne" (THIS is a really good story.) Even though you and your friend are "physically" closer than you are to the movie screen, you would say "kore" as it is obvious you are sharing the same experience of the same story. If you said "Sore wa ii hanashi da ne" it would sound like "That is a good story", and might refer to some story a character in the movie said. Like if the main dude said, after the main girl broke up with him "I eat chips in bed in memory of my dead mother who loved nothing more than eating chips in bed." Then you could say "Sore wa ii hanashi da ne" (He put together a great story.)

If your friend tells you a story you haven't heard before you could say "Sore wa ii hanashi da." (That is a great story.), but if it is a story you have heard before, you might interrupt her and say "Kono hanashi ga suki." (I really like this story.)