Store a morph target at the lowest level. Do your projection, ideally stepping up through the levels and projecting each time. Finally, return to the lowest level and hit "switch" in the morph target options.
good model/textures etc. but i have a problem with the fac there seems to be no targeting device or camera/laser etc. how is this supposed to target people or operated by someone if it cannot see :) other then that great :P
I think it is safe to say that LT was not really designed to be used for re-targeting of animation unless you use Human-IK. Modelling and animation for Indie/Small game devs is what it is currently targeting.
If you still have any problems with spikes in the mesh, try saving a morph target before projecting. Then switch back to the unprojected mesh in the morph target menu and paint back in the projection with the morph brush.