Are there any character types that should be avoided? I feel I should ask since I have a tendency to create characters based on inanimate objects, specifically toasters.
I have LITERALLY RPed with a talking disco ball who worked as a waiter. And a sword from Neverwinter Nights. The only thing you should avoid is God Mode Sues. Because they're boring and no one likes to play with them. They made an Emmy-nominated movie about a toaster. You can absolutely write one. But God mode characters piss me off and I make it a personal vendetta to out-think their writers within the confines of my own characters. (I once trapped one of them in the eldritch abomination of my character's mind!)
How do we create a setting?
In my experience, settings tend to grow up around the characters. Come up with a basic idea and then you and everyone else fill it in. I've only actually come up with one fully-fleshed-out setting on all my own, but sadly, it was never visited. The other setting I created (note eldritch horrors above) was designed to be malleable, based on the player.
So definitely make it a group effort or you'll probably find yourself becoming a GM. That 's what happened to me with the Inn and It's very annoying.
Also, how should we go about interacting with other characters? I can tell the story of my character but I've often had issues writing up interactions with those controlled by others.
In that case, you stick to only your character. Sentence-by-sentence RP is totally okay. (How do you think I got over 200k posts in the Inn?) After some time interacting, you'll get the hang of how the other characters are written, and be able to upgrade. It's basic courtesy to PM the character's author before doing anything really plot-significant to them, but you are absolutely allowed to throw a wrench into things for the sake of DRAMA if the RP is getting boring.
The only major rules are no death, major injury, trauma, or sexy times without the other author's permission.
The best way to do this is to end your post with a question or choice for the other players to answer. It's kind of like drawing comics. Put something in the last panel that will make them want to turn the page. The whole point of RP is character development. Develop your character or give an opportunity for the other players to develop theirs. Think of it almost as a debate, but one where you want your opponent to get better. All the time.
tl;dr Play like you're writing a video game.
WOW, I got passionate about that. *eyes my wine suspiciously*