GMs definitely need to enforce strict "in character" play, eliminate "across the table" chatter, and by doing so - set the scene for an awesome role-play experience!
Forsht Bligo is a dwarf who loves the taste of blood. He's become quite the connoisseur over the years. Pigs blood, sheeps blood, cow's blood, if it's red and warm, Forsht considers it a delicacy. The fresher and hotter the better. Forsht will often sneak up on cattle, prick them with his dagger, and catch the flowing blood in his orc-skull drinking cup. His life goal is to taste the blood of every living animal. Although he has not yet sampled humanoid blood, he is not averse to doing so if the right opportunity presents itself. He is not particularly unpleasant if approached and can be easily befriended. Its just that he simply can't get enough of the "Juice of Life", as he calls it. Forsht's troubles come in the form of frightened and angry villagers who have proclaimed the misunderstood dwarf a vampire. Since Forsht is amused by this, he does little to dissuade anyone. This will lead to some dicey situations for Forsht in the near future.