Where wild minds come to rest
I would dream to have this kind of conversation. Sometimes, I imagine that if I write my story into a book, and end up being a success like Harry Potter or Lord of the Rings (or, not that big, but a at least recognizable to locals), it will be such a fun to discuss the story with everyone nearby while pretending not to be the author of that book. If you think deeply with your MD ability in such conversation, I believe that you may discover there is a way that you won't blow your cover that easily; simply pretend that you are a third person who has deep interest of the character, and they might provide some different aspect of him/her that you probably never think of! This, actually sounds exciting!
I remember when I was a teenager the character and show I was obsessed with and daydreamed about continuously was a massive teen show. So it was a show that was discussed a lot at school but for some odd reason whenever it came up in conversation I would go red, I would feel my face burning up and I would be filled with anxiety.
It was so odd, I remember feeling like they knew I was obsessed and also I felt like it was my show, my secret and I didn't like talking about it. Obviously now I know they would have no clue how obsessed I was or that I daydreamed about the show but it felt like they were delving into something private of mine.
Now if my co workers were to chat about the person I daydream about I would probably be able to join in but I would probably cut the conversation short.
I participate. It's quite easy to simply come off as a big fan and not have them suspect it's deeper
I used to participate a LOT. I'd make it very very clear that I was obsessed with that character, I think I found a lot of identity in doing that. Now, I don't say anything. I just observe the conversation, sometimes nod my head.
Lay low unless I sense the same "enthusiasm," then I'll feel comfortable enough to unleash the beast.
I would say that to "obsess" on a character in an MD context means that you fantasize either about having a personal relationship with that character or fantasize about actually being that character. That means that your knowledge of the character goes well beyond what is known and talked about even in fan circles, but even in fandom there are fans that write their own fiction based on the character. In MD, you might go beyond even that, fantasizing that the character is your personal friend, or that you are the character yourself.
In way of example I will use Doctor Who. Yes, I am a "Whovian" and have attended the Galifrey One convention in the past. My phone has a TARDIS case and often attracts the attention of other Who fans, including people at work. We talk about our favorite Doctor (there are 13 of them now with number 14 on the way), favorite companions, monsters and alien races, etc. There are a lot of obsessive Who fans and lots of fan fiction about the character.
But let's say that you have created MD fantasies about being the Doctor's companion, or have created a Time Lord character of your own. Especially at work, you may not want to venture into talking about your own character, which nobody else has ever heard of. But if the conversation ventures into the topic of fan fiction, or if you are at a convention where fan fiction is being discussed, then it might be OK to bring up your own characters and story lines.
Discuss at the level of the conversation and use your best judgement. This is especially true at work, where you don't want to be judged as a freak or geek and you don't want to be viewed as possibly mentally ill.