My experience has been a lot like others. I had a 3 year old that was terrified of people in costume at parades and other events. Like climbing up into our arms shaking terrified. So we were concerned about her first trip to WDW but for some reason she had no fear at all with the disney characters that she knew. She ran right up to Minnie Mouse on our first day in the parks with no hesitation. And then Daisy, Mickey, Goofy, Donald, Pooh, etc after than. The only ones she didn't like were a couple of bears (maybe from Jungle Book, I can't remember who they were) that we saw in AK.
She's now 6 and still terrified of the local baseball team mascot, the walking hot dog that seems to be in every local parade, etc but shows no fear of characters at Disney.