Book about the characters in a book saving themselves from being forgotten and re-writing the story

I heard another teacher read this book when I was a classroom aide, and she said it was a favorite of hers as a child (baby boomer).

In the book, a princess and a handful of other characters exist in a one-of-a-kind antique book written by the main “real world” character’s relative (maybe a great grandmother or aunt?). The book is either damaged or lost, and the characters are having trouble enacting the arc of the story. Things change a little as the story is being re-written or re-discovered by the in-universe reader.

In the end, the story that you as the reader just finished (and the in-universe reader just wrote) becomes the new story that the characters live within.