There's nothing like hearing the praise of people congratulating and thanking you for your wonderous work.

Well I think immersion is still to some extent the ruling paradigm of AAA game development, it's just that everyone has realised that the holodeck is an awful analogy of it - The Matrix would be a better comparison, because in the Holodeck you're physically present in the simulation whereas The Matrix all happens in your mind (I shit you not, this is the sort of thing game researchers spend their time discussing). But on the other hand the point of The Matrix is that you don't know you're in it. Presumably (in fact let's fucking hope so) that will never happen with videogames - you may forget to pay attention to what's going on around you, but you'll never forget that you're playing a computer game and what's happening in the game isn't real. If you forget that, you've lost it.

Though of course the sad truth is that usually the most you hear about your free work you did in your spare time is flaming, demands and how you should have done it better.

More on some projects than others, obviously. TSLCM's pretty swell, though I do get a little annoyed with one french guy who keeps critizing every bugfix as being wrong and something the developers put in intentionally. If I thought that way of every bug, it would still be the buggy as 1.0b was.
Of course no such issue with 1.0.4+, I could just ask the guys here, who aren't silenced by an Evil Overlord.
A third project I just stopped doing because I got sick of being told how I did everything wrong, and how they perfectly knew it should be better. Which generally meant draining any dificulty or presenting overpowered items for free. It's not a lot of fun making stuff for people if all you get no gratitude at all for all your hard work...

It's easier if you work as part of a group of people so you can get together and pat each other on the back and go "yeah but all those nay-sayers are idiots anyway, we alone know what's right."

Of course you have to be really careful that this doesn't turn into groupthink. The key is to use the group support as a shield for the flames while taking in the reasonable criticism. It's a delicate balance.

That's not how I remember tnm going...

You may remember it more like some asshole sitting in the middle of the project with a huge entitlement complex, constantly cracking the whip and shouting "WORK FASTER! WORK HARDER! WORK BETTER!" over and over again, then finally claiming credit for all your work once the project was completed.

I assure you that's not how it looked from where I was sitting, however.