Despite the introduction the red mist actually settles on Sunnydale in Season 3

Despite being Evil Richard Wilkins kept Sunnydale entirely to orderly in Ethan Rayne's opinion. This spell would fix that. Causing people's fantasies to come to life and for added chaos the victims personal fantasies would be least effective. It would be the way others saw you that would come to life.

Willow reached into her closet and pulled out her favorite outfit. Dressing quickly she headed for school. People were staring at her for some reason. She liked it. But she didn't noticed anything wrong until she reached the library, and everyone's jawed dropped.

"Getting in touch with your inner vampire today?" Xander asked. It was then Willow looked down and realized she was wearing an exact duplicate of her vampire double's outift.