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If i add a project as a library dependency, i need to manually import all the jars and projects and jars of those projects the original project depends on. This is expected in jar files, but not on the project dependency IMO.
Also in big projects, if a project dependency is eliminated, people can "forget" the project dependencies. Slightly user unfriendly. I've tested with a project depending on a project depending on a library now, and it doesn't work too.
Everything as a library works fine though. And is very user friendly too. Just need to remember to update the library, and create various for each SPI implementation
Transitive project dependencies are not supported.