I posted a response on a similar thread, but I guess I'll post one here too.
In all honesty, I don't care what people do with their folders or favorites, as it's really none of my business what they do. I've personally never had my characters added to a dreamy folder, so I can't say for sure how I'd react to it, but I'd probably flattered because out of all the terrible designs I have, someone would come along and actually see them as something nice? If that makes sense. I mean, obviously, I'd let them know the status of that character.
I only have problems if it's a character explicitly stated "NFS" and the individual keeps asking/offering for it.
But other than that, I feel people should stop trying to limit/eradicate dreamy folders altogether. Of course, people can have their opinions on them, but I personally believe it's not important, unless it's a literal problem and the person faving is stalking your characters or something. That's when the line has been crossed.