Characters who are dead in canon are perfectly fine (we have Ianto bopping around right now); as for ghosts, handwave handwave the Artifact responsible for their arrival makes them not-a-ghost. Artifacts mean never having to say you're sorry. XD

And yes, it's up to the player whether the character uses the projector when not around the normals. They're only required when the character's in town interacting with people who don't know what's going on.