I think it can be good. It can be lore or history of the world within the book, or just a story that has similar themes to the book and the character can learn them.

The only full story that I think I read, within a book, was in Phantates. The MC was in a castle and spent his days in the library. One chapter is almost entirely just one story about a woman stuck inside a old mirror that a man bought at a shop. He tries to make her happy by cleaning his room and buying nicer furniture but she’s still sad. It’s kind of a love story in a fantasy world, like the book itself.