I do something similar--I'll run through either remembered past or imagined future conversations in my head. For the past ones, I'll have myself say what I now think I should have said, to try and figure out what would have happened. For the future ones, I sometimes do productive planning ("I want to mention x when this happens"), but I also catch myself simulating other people in a way which is clearly inaccurate but leads to a highly favorable situation (like me saying the "right thing" and someone else swooning).

I have gotten some use out of that last, though. If I'm feeling bad and imagine someone saying just the right thing to me, and then me feeling better, I now know exactly what I want to hear. Then I tell the other person what that thing is, being clear if necessary that it's not that I don't know it already, but that hearing it again right now would make me feel a lot better (useful for avoiding defensiveness when the thing is, say, that they love you). There's a chapter in the Usual Error about this, which is what made me realize that I can just do that and it works. (You can insert a mental "yet" into the sentences about not being purely rational, if you like. Tsuyoku etc.)

Anyway. I think the phenomenon in general is called daydreaming, and it's normal, even the exaggerated/narcissistic-seeming kind. I feel like I see it referenced/parodied in popular culture a fair bit, and I don't see why that would be true if lots of people didn't really do it.