As a writer, I can assure you that, depending on the circumstances, creating new words can be a necessary part of the story telling. For example, in sci-fi, a writer will create a society and a new language for that society. I do that in my stories, I invent languages and, consequently, will invent words for items that have English words for them. However, once it's established that there is a different language being translated, I will return to the correct English words.
It's a very useful vehicle for worldbuilding, and I would encourage it with two caveats: one, that the term's meaning and connection can be easily intuitively gleaned, and two, that it's flavor and the terms themselves are not the focus of the story or overly harped on, because then it seems like you're trying to market a term rather than tell a story.
Oh, I completely agree with you about that. When I create a word, I always give the meaning of the word and, even though I may continue to use the word throughout the rest of the story, the story doesn't revolve around it. For example, a story I'm currently working on has a hybrid species that was created as a result of an attempt by a terrorist group to cause the extinction of the human species. I named the hybrid species humanimals due to the fact that they were created by splicing human and animal DNA to create an intelligent species to replace humans when they finally went extinct. Humanimal(s) is used to describe the new species and is only used in passing the rest of the story.
In another story that I've completed, I created a language and, even though I translate a number of conversations from the language I invented into English. After the first chapter in which I use the language in conversation, I revert back to English for the rest of the story, except where I would need to use one of the words, i.e. Chorotha for father, Norotha for mother, etc.
I hope this gives you an idea as to what I do with my languages and invented words.
Story telling is one thing...
But for things such as this... Hmm... nope. Cringeworthy on another level.
More information about formatting options