Even though Honesty is important in an Interview, you need to still jazz up certain stuff or underplay your weaknesses. That much of covering up (not exactly lying) is totally fine. Confidence and the way you speak matter a lot. Interviews can get tricky when its in front of a panel. That is when you need to really be smart to crack it.

No you are not being unrealisitic. You can definitely do a PhD and I am sure you will do it well. You need to be certain that your interview is given well and all universities have different requirements. You can apply to the ones that suit you the most.

I see no point of doing a PhD if you want to fake a research. Cheating in achieving something is pointless and meaningless and you will never enjoy the fruits. What was your motive of doing a phD, didnt you wish to research and learn something new. Wont that be a fulfilling experience. If you fake it might as well don't do it. Cheating others and yourself is not a way of achieving goals. I am surprised that your professor suggested this to you.