Particle_Man: I agree that this is probably the best interpretation.
Emirates:
Although I like the statement of characters not knowing their hit point total, and also think that separating PC- and player knowledge is an important aspect of roleplaying, I don't agree completely. I think characters have a certain knowledge about their health and can tell pain from an inconvenience, but that is not my main point.
The SRD says:
They cannot cause damage to objects or creatures, support weight, provide nutrition, or provide protection from the elements. Consequently, these spells are useful for confounding or delaying foes, but useless for attacking them directly.
I think that the article by Skip Williams further explains that figment illusions are meant to distract and delay foes, not cause them to assume they have taken damage where actually they have been subject to an illusion (that would be the province of shadow magic which cause in part real damage and in part illusory damage). Skip Williams specifically says:
You can use a figment to fool opponents, but you can't harm them or affect them directly. For example, a wall of figment flames might cause foes to halt or make a detour, but it won't burn anything.
Therefore, IMO, they will feel the warmth, but as soon as they interact (see the article for some suggestions on how to interpret interaction), they will know it is unreal -- no blistering heat wounds, no hairs burning, no pain, no catching fire. The WOTC article even goes as far as stating that when interacting with an illusory guard, the
character makes the attack, using at least a standard action to do so. Hit or miss, the character makes a Will save to disbelieve the illusion immediately after making the attack roll.
If the attack hits, the character probably should disbelieve automatically
IMO, that is nerfing the illusion figment spells a bit too much, also because every attacker will almost always hit the bad AC of the figment. In my campaign, we just allow the save when the illusion is hit as a house rule (if the caster concentrates to let the illusion react appropriately). But I think by the WOTC explanation, any character touching an illusory wall of fire will notice it is not real, because they do not take damage.