I will speak with the PD. I just want to be in a slightly better morale to do so. Also, do you think I should attempt to complete my project before speaking with him? Also why do you think he would bother letting me do research in his lab if he never intended on admitting me or while even bother interviewing me if I'll never get in?
I think the point of doing research in a desired specialty is to broaden your horizons i.e. learn more about the specialty, and it is good background for going into a residency. From surveys of residency selection factors it might not be as big a factor as board scores and clinical grades. Research does help I think more at the fellowship level. Excellent medical students with great board scores and excellent clinical grades, but no research, match all the time into prestigious residencies.
Point being, research is not a "time out box" where you sit and collect points which will help you get a competitive residency. IF you do excellently, and are a star researcher i.e. several first publications, a PhD or a masters degree then yes this will help you, but if you just sort of punch your card for a year at a lab doing work that an undergraduate can do, and without a lot of passion, then this won't help and could hurt you.
If you love dermatology research then do it, but don't go for it with half a heart and hoping it alone will increase your derm chances . . . if it demonstrates your passion for derm then do it.
Your PD may have interviewed you as a "courtesy interview", or perhaps there was some real interest going on there in your application, probably both. However, just doing some research part time in a PD/PIs lab in fourth year won't sway him/her enough to give you a guaranteed position. Being allowed to work on research projects is not a big deal as the PD/PI can find an undergraduate to work full time and is more of a favor for you so that you get some research experience.
PDs want residents who are interested in research if they have a record, i.e. multiple publications then they might take an applicant, but if you did just some research in fourth year then you wouldn't be an investment as a star researcher.
Remember, when the PD and committee sits down to rank applicants, if you do not have third year honors and don't have say 230+ on Step 1 or higher then yes, with the competitive nature of dermatology this is a negative. Also, consider that there are many derm applicants who matched who had stellar board scores and clinical grades AND research . . . although the PD knows you, he/she would likely rank other such candidates higher as they sort of did more work. It isn't a slight to you.
I think some schools take their own applicants as the students rank their own program first and want to stay in said city, but they might also be and quite likely are quite stellar candidates.