Legally there is nothing wrong with using a celebrities name in a story which you are distrubuting freely. It moves into more of a "grey area" if there is possible slander or defamation of character taking place.

However, aside from the legal aspect, using a certain celebrity in a story can make the story more interesting if it is a celebrity whom you like, or dislike. In addition, while you may have to spend a lot of time describing a personality "like" Madonna for instance, it is a lot easier just to use Madonna in the story whom most readers will already be familiar with.

Personally the idea of a celebrity being a character in a story is interesting, but wouldn't be something I would actively look for. Also, when using a well known character you can benefit from people knowing that character already but you can also potentially lose out if you portray that character in ways that readers feel is not in step with the true personality.

Drake.