Do people with Alzheimer disease often make up stories?

She could be covering for the fact that she forgot the brunch. She doesn't want people to know her memory is giving her problems (that is if she does have dementia) so she makes up what to her is a plausible excuse. So, yes, covering "slips" is common.
Carol

My mother-in-law is the text book case of 'confabulation'. She's remembering things that are true but also made up. She doesn't mean to do it, but with the onset of Alz. she can't help it. Look up the word and see if your sister qualifies.

My father in law told wonderful stories before he had alzheimers. After he had anesthisia for heart surgury he was convinced for the rest of his life (4 years) he was a singer in Vaudville and on Broadway. (Thankfully he had a good voice.) As his alzheimers got worst we would hear stories that had no truth in them.