I think a key thing as spy is to avoid groups completely. If you reduce the chances to bump into someone then it will make life easier.
I think spies work best when they are trying to pick off the people at the back of the lines, whether it's people running from spawn, or engineers or people going back for health. Kill, cloak, hide.
If you're in a situation where, when cloaked, you're trying to get through a group of enemies, either following, or running through the front line to get behind the enemy, then I highly recommend jumping from side to side. Being able to reduce the area of possible contact with an enemy is the key.
When disguised there is a little bit of timing involved, as well as a clear plan. You need to look like you have a definite movement, nothing gives away a spy as someone just running around after another person. If you attack when they are attacking then it's easier to blend in and not look suspicious.
I do my attacks as spy in a forward motion. Cloak, get in behind the lines, disguise, decloak, run forward with the enemy attackers and attack. No matter the result, I push through to my team-mates, heal and resupply. Rinse and repeat. Obviously if your using the cloak and dagger or dead-ringer then it's different.
There is a huge slice of luck involved with tracking and pushing through as a spy as people are a little unpredictable and sometimes you just get unlucky.
The cloak blink time is the time the spy "shimmers" and becomes partially visible after getting hit or bumping into enemy players - your 2nd guess is accurate.
0.5 seconds may not sound like a particularly long duration, but I've personally killed a lot of spies because of that blink effect and I do believe this will have impact on gameplay. Usually when I attack a blinking spy I don't 100% know where he is, just the general direction he was walking in the last time I hit him. With this, I might be able to chain my shots while the spy remains visible the whole time.
Best Answer
Friendly disguises are mainly used to hide from the enemy that there are Spies in your team, as well as to fool an enemy into thinking your team employs a certain class when in reality it does not. There's little more utility for friendly disguises than that, but they're very handy during setup time when the enemy can see you through the setup gates, as well as when you're among your teammates. There's more of this in the community Spy strategy wiki article.
Remember that since you're disguising as your own team, the opposing team will see you as an enemy player (whichever class you're disguised as) and act accordingly, and enemy Sentry Guns will target you as well. When you're about to infiltrate into enemy lines, use your cloak and/or switch to an enemy disguise.
Any of the cloaking devices works well; in fact, if you use the Dead Ringer with a friendly disguise, you will drop a fake corpse of the class you're disguised as. If you were disguised as an enemy, you would drop a fake Spy corpse, which often sends a stronger signal to opposing players of a possible DR Spy.