Yeah, I've seen the phantom character next to me there. As I recall, it looked like another one of mine. Were you swapping daggers?
Nope, I have two really nice daggers (well, three now actually, but use the same two on all my dagger-users) so never change. That's why I'm assuming this might be the other character I was grouped with. If you'll notice at the bottom right of the screen, it gives the "Waiting on you and one other player(s)..." text you normally get in a group.
I've seen other people's characters I've grouped with appear like this before, but never "full screen" like this. usually I'm in my usual place on the right, and others are to either side of me. Plus the GUI is still there. This is the first time the GUI has disappeared, and also the first time it has locked me out of the game and required a re-boot of the game client.