I used to always do the projecting flaws thing, but less since I've come to terms with acceptance of my own flaws.
In high school I'd constantly DD about being a champ at social situations and everyone else was more awkward than me, where it was the opposite in real life... LOL!
I've heard that DDing can desensitize us to our fears as well!! Something I should do more often :P
Wow...Great topic...It really caused me to think and reflect. Which is good! I realized that I don't do this. Come to think of it, I don't really think of every little detail of my fictional MD characters. I know the hair colors, personalities, clothing styles and cultures of them, but not an exact physical appearance. Like, I know I made this one girl, Tiffany, look like this Barbie Doll I used to have and adored. But I don't really focus on my other characters too much.I mainly focus on my character's appearance, and how she doesn't have the flaws I have in reality. :)