No, I'd never re-gift in a case where the person could find out. That really would be rude. I've only done it in a totally different circle of people and when the gift-giver wouldn't be looking for it. But if it's not something you're comfortable with, that's understandable and you shouldn't do it. I just figure why let a gift go to waste in a closet when someone else could enjoy it.
Yes and no. I wouldn't want someone holding onto a gift I gave them if it's of no use to them, but I'd like some indication if a gift I give is off the mark. If the gift can be exchanged or something, that's my preference. My family has also done re-gifting Christmases, where we were only allowed to give things we didn't want or need anymore or regift things we'd been given. Several gifts given by family members resurfaced. It was hilarious. There were no hard feelings at all.
With all that said, I think there are certain ground rules to follow if you do regift.
1) I don't think you should regift within the same circle unless it's something funny like my family did. The person who gets the gift has to be someone who will never come into contact with the original giver.
2) Secondly, the recipient should know it's a regift and why they're getting it. Don't just give someone a loaf of fruit cake because you have it. Maybe your sister loves white gold and you like yellow, but you got white gold earrings from someone. If they suit your sister, tell her that's why you want her to have them instead. If you're diabetic and get chocolate, you can give them to your favorite chocolate-lover, but make it clear that you're regifting because you know the person will love it and you want it to go to someone who can enjoy it.
3) Lastly, you can't regift something that was picked with a lot of thought or was personalized by the giver. i.e. If your significant other gives you jewelry that they agonized over, you wear it. You don't complain. You don't ask for something different. Later, you can try to give them helpful hints, so they have a better idea of what you like. If your aunt gives you pink fuzzy bunny pajamas she made by hand, you keep those suckers. Wearing them is optional. lol
There are times when it's OK to do so, like if you receive duplicates and you know someone who would love to have the item. But most times, there are a lot of pitfalls. Always inspect the item and remove any gift cards.
One time I got a Galileo clock as a gift for working on a project at my job. I had no use for it and thought that Mom would really like it and it would look good on her wide windowsill. When she opened the box, she exclaimed 'Oh, look, there's writing on it'. I never looked closely and there was an inscription about the project. Luckily, Mom thought that was even better because she was proud of me. (She didn't know how many useless items I was given over the years).
I don't want to tell you how many things are cluttering up my closets because they were gifts that I either didn't like or couldn't use and I couldn't bring myself to regift them.