In "The White Inn", retracted the story (7)
I believe the answer is:
parable
'story' is the definition.
(I know that parable is a type of story)
'in the white inn retracted' is the wordplay.
'in' means one lot of letters goes inside another.
'the white' becomes 'pale' (I've seen this before).
'inn' becomes 'bar' (I've seen this before).
'retracted' is a reversal indicator.
'bar' back-to-front is 'rab'.
'pale' going around 'rab' is 'PARABLE'.
'the' acts as a link.
(Other definitions for parable that I've seen before include "Leap bar poorly for a biblical story" , "Moral tale" , "Story illustrating moral lesson" , "Sower, for one" , "Biblical allegory" .)