Bashir is remarkably immune to the imaginary Dax's advances. But this is Star Trek, and there are Holo-Suites onboard the station, which are explicitly used for sexual fantasies. If Bashir wanted a dalliance with a fictional Dax, he could do it at any time.
While most of the crew have wish-fulfillment fantasies, Kira imagines the hallway bursting into flames. Given her history, this is clearly a glimpse into her PTSD.
