Baked normal map from high poly bad corners

Question

I'm trying to bake a normal map from a high polygon model to a low polygon one.

It's a very simple domino shape. When I use the normal on the blender render, I get this strange shape at the border of the shape

I'm not really sure what I'm doing wrong. Is the low poly shape not detailed enough? Is it too big or too small?

Here is the link to the .blend.

Edit:

OK, after Mr Zak's answer I managed to understand why the baking was not creating a normal in the correct size. It was because both objects didn't have the same scale. I've applied the scale for both objects and now the normal and diffuse bake seemingly correctly.

Unfortunately, I still have the issue with the result not being as I expected

As you can see, it goes all the way to the borders now, but it has a weird shape.

For the record, this is my high poly

As you can see, the UVs are well inside the normal map, and for the diffuse it's a simple blue diffuse.

I really don't understand what I'm doing wrong with the way I bake the high poly to the low poly. could it be that my low poly is too low poly?

Here's an updated .blend.

Answer 1

Let's start with vertext normals of smooth and solid shaded mesh:

Now see this diagram how baking works and projects the high-poly to lowpoly:

In each corner of your domino piece you see 3 corners baked, because of Repeated details. You can fix this by making the lowpoly domino shade smooth - that way there will be only 1 vertex normal in each corner, so you won't get overlaps and multiple projections:

If you want your domino silhouette to look better, you will have to add mode polygons. See: How can a Normal Map affect the look of a model?

There is also very comprehensive wiki about normals which might help: Polycount Normal map (the pictures are from there).

Answer 2

That red border is red material assigned to model and seen through diffuse map.

If you look closely at the "Diffuse" texture when UV map selected, you can notice that there are regions where UV map is larger than the texture:

These areas will be visible on the model:

And because of alpha-transparency presented in image, the black areas, marked on the screenshot, will be transparent, revealing everything underneath. So you'll see the material (which has red color as diffuse):

Note that deleting alpha-transparency won't help: those areas will become simply black.

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Possible solutions might be to create (or edit this) image which should be a little larger so to have several pixels border around UV map.