You were right to see Dido as a kind of Cleopatra; I think that the equation of Dido with Cleopatra means that Dido seems much more sympathetic to us than she would have to a Roman reader. For them it would be a bit like suggesting a plausible romance with Stalin. If Stalin were sexy, anyway. But I'm not sure that's all down to Augustus; I think Book 4 is the turning point for the poem as a whole, and I don't think that Virgil would have put an episode there, which is so obviously important, if it wasn't something he was committed to. In fact it's a section I like very much, because Dido is sympathetic, despite everything, and Aeneas does love her, although he denies her. And leaving her is one of the hardest things he has to do.

Of course, women in the Aeneid aren't really characters--they're standing in for ideas and notions of home and belonging. So Aeneas has to go from Creusa to Dido, leaving them both behind, and ends up with Lavinia, who remains a complete cipher, and has to be so, because Aeneas never really gets home, at least not within the poem.

I can see how the correlation between fascism and Octavian is made so often (but only because I think that most of those theories come out of a misapprehension of what fascism truly is).

And indeed, of what Octavian was really up to. The modern state and the ancient state are so very different that you can't really compare them. (But it's true that Mussolini was a big classicizer--he was all about restoring Rome's greatness, although Roman themes were used by the opposition to his policies as well).