No doubt, projections are real. Exactly as are dreams. And one can argue that "standard waking state" is no different. The perception of each is constructed in the same way after all. The question is how does it tie to uncategorized reality.

I would say that the conundrum of duality is just a mental manifestation of our unique ability to partially suppress our instincts.

EDIT: That part about instincts is BS — see here.