Will this attract more users or drive them away to avoid getting flagged?
The only way it can attract more users if they give money for every submitting the information.
Fortunately my local exchange "haven't" ask it.
If you've already completed KYC, why would they ask you for this information again? It should already be registered.
In general, I don't see a file upload option, so you can enter any information, right?
It's to make people who haven't KYC dragged to KYC.
Example you never KYC your account, then you send coins to @OP, @OP will ask your information.
I think yeah he can enter any information, unfortunately the problem arise in the future if the exchange/government find suspicious information.