There's a problem with the situation in your question: Star of Extinction doesn't deal damage to players, so there's no interaction with Story Circle. "Planeswalker" just means an actual planeswalker card, like Liliana, the Last Hope etc., not a player.
Let's replace Star of Extinction with something like Earthquake instead. Yes, this works. Story Circle specifically says it just prevents the damage dealt to you, not anything else. If an effect is dealing damage to multiple players at once then Story Circle won't prevent the damage being dealt to the other players.