These are the rules I've been following, mostly since the beginning (though some are just agglomerated habits). Someone else might have different rules. I might have different rules if I were doing this again, but these are the ones I stick with for consistency.
To do the Index, I go through the episodes in chronological order. This way I ensure that I catch all characters, and know when I've seen a character before. That's the ideal situation, anyway; I skip ahead if I've gotten too far behind, and fill in the gaps later.
When I read an episode, I look for two things -- the appearance of new characters, and new name information being given about a character who appeared in an earlier episode. The latter includes both new names for characters who have been nameless, and additional names for characters who have only had partial names (such as when Principal Geiser's first name was revealed to be Katherine).
Descriptions are usually created using the author's own words. For example, a character is usually only called a bimbo if the author himself did so. If the episode was in German, then I write the description in German too.
When I have skipped ahead chronologically (such as when I was working on the 2000 entries before I'd finished 1999), I can't always be sure that I'm seeing a character's very first appearance. In that case, I put "(first?)" after the entry. If later on I find that they in fact appeared earlier, I will remove the later entry. If I find out for sure that they didn't, then I'll remove the "(first?)" notation.
Sometimes a description will refer to a character as "name/name", for example, "Jim/Jessica's boyfriend". That indicates that the relationship applies to Jim after he's been transformed into Jessica.
If a new character appears in an episode, I put them in the Index
If a new character is mentioned by name but doesn't actually appear yet, then they go in the Index with "(mention only)" after their description. If they later put in an appearance, they get a second entry in the Index, usually with the same description but without the "(mention only)".
If a character only appears as someone on the other end of a phone call, or sends a letter to the POV character, that counts as an appearance. Animals and robots count as characters too, usually.
Sometimes our more careless authors will spell the same person's name differently within the same episode. In that case, I try to take the spelling used most often by that author. Sometimes it's harder to tell -- if they've only given the name twice, and spelled it differently each time, I usually pick the one that seems most "normal" to me. If the author is Francis I will sometimes assume that all spellings are incorrect and record the name the way I think it ought to be spelled, which is probably bad of me...
If a new character appears but is unnamed, and the options for the episode each give a different possibility for the person's identity (such as when a woman appears and there are separate options for it being Robin or Sharon), I will often wait until the child episodes before putting the person in the index.
When new information is found, I go back to the character's original Index entry and add a note to that effect, with a link to the new episode. Often conflicts will occur -- some of the earliest unnamed characters received two or three different names in different threads.
Additional info I do not make note of:
I usually ignore the options of an episode. If a character appears only in an episode option, then they never get into the Index. A number of episodes list a new POV character to follow in each option, but I only record the ones that have been followed up with a new episode.
There is one case where I do not ignore the option text: if a new character appears in an episode, I will often go back to read the option text that led to that episode, to see if there is more name or description information available there. However, if name or description information in the episode actually conflicts with information in the option, the episode info has precedence.
Fictional characters (such as TV-show characters) do not get "(mention-only)" entries, but only entries for when they actually appear.
A fictional character only gets an entry the first time they appear. Even if they are later used in completely unrelated storylines, when a second entry would be useful.
For comic-book characters, I only list them under their "codenames" even if their real names are also given. Easier to keep track of them that way. Though that causes a problem with characters like the Flash where different people have used the same codename.
Real people (usually celebrities, but can also be historical figures) do not appear in the Index at all. Partly because they're not characters, and partly because I have certain qualms about sex fantasies featuring real people.
There were two exceptions, which were cases where the characters were no longer appearing as "celebrities" but had basically become just characters named "Janeane" and "Sandra". But after enough arguments about it I finally decided to remove them as well and forbid real people entirely.
Sometimes a character will seem like they might be a real person, but I've not heard of them. In that case I put a "(real person?)" notation by their name.
If I later find out that what I thought was a character is actually a real person, I will delete them from the Index.
Since the skinsuits found in the Skinsuit Warehouse usually come with histories and names of their own, they get index entries too, though with the "(skin)" notation. If the real person represented by the skin shows up later (which happened with Jim's neighbor Jacqueline O'Connell, among others), then they get a separate entry with a "(the real one)" notation.
Authors are added to the Index only if they appear in the episode as a character or Avatar. Merely being mentioned by another character, or merely speaking directly to the readers as the Author, will not gain an entry in the Index.
Unnamed characters, obviously, cannot be put into the alphabetical list. When an unnamed character receives a name, that name is added to the list with a link to the episode where the name was created.
Characters are listed by first name, unless that is unknown; then they are listed by last name. If a last-name-only character receives a first name, a note to that effect is added to the last-name only entry, and a new entry for the person's full name is added with no description, just a note to see the first entry.
Anime/Manga characters are shown and filed in Western order (family name last), even if the episode gave them in Eastern order (assuming, that is, that I was able to tell).
The link that's used for the name is that of the name's first use, even if the use was for a "(mention only)" entry (i.e., the character didn't actually appear in the episode).
There are many duplicate names -- numbers are appended to differentiate them, so that other entries can refer to the right one. For example, the description "sister of Susan" is confusing, while "sister of Susan 12" is less so. However, if a character appears as both a skin and as the real person, they each get an entry but they both have the same number.
Major characters are listed in large type. This is a subjective judgment. Generally, if someone is a Point-of-View character, or if they are linked to a large number of other characters (such as Melissa 4), then they're considered "major".
Facts about the characters and other things vary widely across the entire Addventure. The "notes" pages describe many of the more contradictory facts that have been established about some of the characters, etc.
While I'm reading episodes for the Index, I keep an eye out for the specific things I'm tracking -- such as relatives of Jim or other major characters, new buttons on the Remotes (or new Remotes), new PokeWomen, or new appearances of multi-storyline characters such as Demonica.
In addition to name information, I also like to note the ages given for the characters on the notes pages, including conflicting ages. Don't know why I like to track the ages and nothing else, maybe because it's the simplest clue to how a character might relate to the others (especially relatives of main characters).
For Remote information, I give a basic origin of the Remote, then note down the labels and functions (where known) for each button encountered.
For PokeWoman information, in addition to noting the first appearance of new PokeWomen, when I find an episode which contains a "pokedex entry" for the creature I add a note to the page for that episode.
I made some decisions at the beginning that I'm no longer sure about, but have stuck with for consistency --
Also,
This will not happen any time soon...